Finance minister convenes first crisis management meeting in 10 months


Finance Minister Bahk Jae-wan on Wednesday warned the market against fear-driven investment, calling it an “overreaction” threatening the favorable fundamentals of the economy.

Addressing the first crisis management meeting in 10 months, Bahk said there are considerable risks to the economy growing from the prolonged debt concerns in Europe and the U.S.

“Financial and currency markets are reacting sensitively to external fear factors,” Bahk said. “Though the real economy remains on its recovery track and the employment situation is improving, things are showing signs of slowing down based on sentiment indices.”

His comments came as worsening economic data spooked the market and caused a 2008-style flee in the past month. Relevant ministries on Sept. 28 decided to revive the crisis management meeting last held in December after debt jitters abroad wiped about 10 percent off the KOSPI in September and caused the won to rank as the 4th most volatile currency in the world.

Bahk said there would be considerable risks in the real economy should such “excessive” sell-offs continue. Bahk’s concerns were echoed earlier by Vice Finance Minister Shin Je-yoon, who warned of intensified intervention in a briefing held after the KOSPI on Tuesday fell 3.59 percent.

Government data last week said export shipments fell by a seasonally adjusted 0.2 percent in August from a month ago after a 1.7 percent fall in July.

Retailers’ business sentiment came in at a two-year low Wednesday. The retail business survey index compiled by The Korea Chamber of Commerce and Industry fell to 105 for the fourth quarter from 119 in the third, hitting its lowest since the second quarter of 2009.

Bahk said some slowdowns in exports would be inevitable as demand shrinks in advanced economies.

“The country’s current account surplus stayed in the black for the past 20 months. Surplus may be narrowed due to recessions elsewhere, we will continue to monitor export activities and prepare for downside risks,” Bahk said.

By Cynthia J. Kim (cynthiak@heraldcorp.com)