Christine Lagarde. (Yonhap News)
Christine Lagarde, managing director of the International Monetary Fund said Thursday that Korea needs to implement a package of economic reform measures to sustain growth.
The Korean economy is “more resilient than it was five years ago,” she told the press.
But Asia’s fourth-largest economy needs to do more in the face of low female labor participation and low productivity in the services market.
She suggested that Korea should make its labor market “more inclusive” to temporary or nonregular workers, college graduates and women, and increase social spending and safety nets such as child support benefits for women and training for the young.
This is, however, not sufficient, the IMF managing director said, adding that regulatory barriers should be removed to increase competition and thus, productivity in the services sector.
“With implementation of the right package of reforms, Korea could keep growth at 3.5 to 4 percent over the next decade in spite of fast population aging,” Lagarde said.
She said that the Korean economy would be able to buffer itself against risks stemming from monetary stimulus cuts in advanced economies due to its sound macro-prudential framework.
However, the managing director said that it would be “more desirable” for Korea to import more and increase private consumption for trade rebalancing given its high current account surpluses.
The IMF managing director met earlier with Korea’s Deputy Prime Minister and Finance Minister Hyun Oh-seok to discuss the latest issues concerning the global economy.
Hyun asked Lagarde and the IMF to push efforts to minimize global risks stemming from the impending monetary cuts in advanced economies.
The two sides also signed an agreement in which Korea pledged to boost its contribution to the IMF’s development programs by providing $15 million for technical assistance and training for IMF members over the next five years.
“This is an investment in the future and global solidarity. It will help the IMF to meet demands of member countries for our technical and assistance initiatives in the years to come,” the IMF managing director said.
Korea has been supporting IMF technical assistance and training, most notably with contributions to the Pacific Financial Technical Assistance Center since 2004 and the Topical Trust Fund on Anti-Money Laundering and Countering the Financing of Terrorism since 2009.
“The contribution along with the establishment of a Korea Subaccount at the IMF elevates Korea’s profile as a donor to the IMF’s capacity development activities,” the IMF said in a statement.
By Park Hyong-ki (firstname.lastname@example.org