S. Korea should keep expansionary monetary, fiscal policies: experts

SEOUL, May 20 (Yonhap) -- The government and the central bank should keep their expansionary policies as it is premature to say the South Korean economy is beginning to recover, experts here said Wednesday.

"The financial market has recently stabilized and a decline in the real economy
has eased... But (authorities) should continue to make efforts in terms of
monetary and fiscal policies as it is too early to say that the economy is
entering a recovery phase," experts were quoted by saying in a statement released
after Bank of Korea (BOK) Gov. Lee Seong-tae met with five economists.
The statement comes following Finance Minister Yoon Jeung-hyun's reiteration that
the government plans to stick to its current expansionary policy stance to
stimulate slumping domestic demand and kick-start the slowing economy.
After freezing the key rate for the third straight month, Gov. Lee struck a
similar note last week, saying that the BOK will maintain an easing stance for
the time being.
As some economic indicators show that a sharp decline in economic activities has
markedly eased, there has been controversy over when the government and the BOK
should begin to absorb what some have called excessive liquidity.
Minister Yoon said Tuesday that the quantity of short-term floating money pumped
into the market is not excessive and the government is not considering a change
in overall policy stance.
"There is the need to channel the liquidity into the real part of the economy,"
the experts said in the statement.
The BOK predicted that the local economy will contract 2.4 percent this year, the
worst performance in 11 years, due to falling exports and sluggish domestic
demand.