South Korea’s finance minister discusses the world-wide financial crisis and gives his take on what needs to done to address the situation.
The Group of 20 industrial and developing nations needs to shift its focus to resolving the current turmoil in financial markets, South Korea’s finance minister said Thursday.
“The G-20 could be criticized for not taking enough appropriate measures to address the current situation” as it has focused more heavily on midterm structural reform issues, said Bahk Jae Wan, who is in Washington for the fall meetings of the International Monetary Fund and the World Bank.
His comments come as finance ministers and central bank governors of the G-20 gather alongside those meetings to discuss mutual cooperation for averting another global financial crisis, with an emphasis on encouraging Europe to swiftly resolve its debt problems. South Korea chaired the G-20 last year.
In an interview, Bahk declined to delve into South Korea’s support for specific proposals for short-term solutions ahead of the discussions. He said, however, that improving the global financial safety net would be one way to go forward.
The U.S. and emerging markets have expressed frustration at the sluggish pace of efforts in Europe to respond to its crisis as it threatens to push advanced economies into another recession.
Bahk said fallout from the crisis will have the biggest external impact on the South Korean economy in 2012.
Though the extent of such impact will be “limited,” Bahk said, the degree that sluggish growth in Europe and the U.S. will affect emerging markets–which account for 72% of Korea’s exports–is difficult to estimate.
Bahk said South Korean authorities are also concerned about “excessive and unnecessary” volatility in the domestic currency market caused by capital flows, which has seen the won appreciate sharply in the first half but fall to a one-year low against the U.S. dollar this week.
“We’re a very open economy, and managing capital volatility is a difficult issue. We want more cooperation on the international level,” he said.
Bahk acknowledged that the won’s decline will affect South Korea’s import prices and will add a certain adverse impact to inflation, but maintained that price growth is still expected to stabilize “in the general range” of the government’s 4% target for the year.
South Korea does not specifically target any currency level and will not use its foreign-exchange reserves to manipulate the exchange rate to reach a specific inflation or export target, he said.
Korea also wants to see more progress on a framework for global rebalancing, as well as a development agenda to spur growth in poor nations, as a way to deal with challenges the global economy faces by increasing demand in the longer run, Bahk said.
Read all about World-Wide Economic Concerns on the Wall Street Journal blog
