South Korea and the International Monetary Fund
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South Korea and the International Monetary Fund (IMF) partner together to assist the country in managing its financial system. South Korea's economy is considered fundamentally sound because of the balance of their banking sector and their aim toward a zero structural balance without compromising their ability to sustain debt.[1] The IMF Board in 2019 assessed that the policy framework and financial system in place are sturdy and firmly set.
History
IMF membership
South Korea joined the IMF on August 13, 1955.
As of recent, the IMF sent a team to Seoul to discuss the fiscal policy that is supposed to assist growth in the short and medium term.[5]
The Asian Financial Crisis
Intervention
After the
South Korea signed the agreement with the IMF to address their deficients due to the 1997 Asian financial crisis.[10]
The structural provisions included:
- increased flexibility of exchange rates
- tightening of monetary policy
- structural reform to remove features of the economy that would stunt growth
- increased activity of foreign players in the domestic financial market [6]
Other policies and programs forced Korea to slash government expenditure, raise interest rates, liberalize trade, restructure the government, and stop Korean conglomerates from expanding, in the hopes of stopping inflation and increasing foreign reserves.[7][8][9] This action stabilized South Korea's foreign exchange market.[7]
The policies impacted the South Korean population and families. By May 1998, 80% of households had suffered from lower incomes.
The residual costs from the loan conditions continue to affect the country[citation needed] These costs are reflected in cuts in funding for government programs, higher unemployment and slower economic growth. South Korea created a safety net with other Asian nations, to avoid any future financial crisis.[citation needed]
Financial Safety Net
South Korea has not borrowed from the IMF since the 1997 crisis. According to the Organization for Economic Co-operation and Development (OECD), South Korea's reserves have increased from 21.556 billion SDR in 1997 to 247.759 billion SDR in 2014.[14] As of 2017, the nation's foreign reserves are around $390 billion SDR.[15]
As a result of the increasing complexity in world financial systems, South Korea joined the
Today's market
Labor Market Duality
The labor market in South Korea is classified by the dual tier system. There are the "regular workers" and "non-regular workers". In the “regular workers tier", the workers have higher wages and more social benefits. Alternatively, the "non-regular workers tier" receive significantly lower wages, more likely to have little to no social welfare and subordinate job security. This is due to the inconsistency of job lengths. A rapid increase in temporary work is an underlying fact that may potentially lead to problems in the long-term.[18][19]
Based on statistics, the trends of "non-regular workers" has remained consistent and constant. From 1989 to 2016, the shares of temporary workers has fluctuated and hovered around 25-35%, but it overall remained steady. Factors that shift the balance of the two tiers is the large sums of women, children and the elderly. They take account for a majority of the unemployed, part-time and temporary workers.[19]
Recent projections and outcomes
South Korea's economy has experienced less short term growth in recent years. The GDP growth fell to 2.7 percent in 2018 relative to the 3.1 percent in the year prior.[20] The predictions for 2019 is that growth will slightly fall to 2.6 percent due to an expected increase in internal demands and a decline in external demands.[20] Both foreign exports and investments weakened as a result of this diminishing growth, while the labor force productivity is on the decline.[1] The target inflation is expected to be higher than the projected number for 2019 and 2020.[1]
As of late, the Korean government is taking the proper steps to address this decline. In order to counter this decline, the government has increased their federal allowance and proposed a larger supplementary budget. In turn, this change is expected to boost the economic activity and provide fiscal support to the state.
In popular culture
The Asian financial crisis, its effects and consequences are depicted in Reborn Rich, a 2022 TV series.
References
- ^ a b c "Korea's Economic Outlook in Six Charts". IMF. Retrieved 2019-12-03.
- ^ "List of Members' Date of Entry".
- ^ a b c "IMF Members' Quotas and Voting Power, and FIM Board of Governors". December 2, 2018.
- ^ "The Republic of Korea Renews IMF Capacity Development Partnership with US$20 Million Contribution". IMF. Retrieved 2019-12-04.
- ^ "IMF Staff Concludes 2019 Article IV Mission to Korea". IMF. Retrieved 2019-12-09.
- ^ a b "35493D.Doc". web.stanford.edu. Retrieved 2019-12-09.
- ^ a b c "Korea's Economic Adjustments Under the IMF-supported Program--Presentation by Kunio Saito".
- ^ a b Pollack, Andrew (4 December 1997). "CRISIS IN SOUTH KOREA: THE BAILOUT; PACKAGE OF LOANS WORTH $55 BILLION IS SET FOR KOREA". The New York Times.
- ^ a b W.L. Hill, Charles. "The Asian Financial Crisis".
- ^ Hays, Jeffrey. "ASIAN FINANCIAL CRISIS IN 1997-98 IN SOUTH KOREA AND INDONESIA | Facts and Details". factsanddetails.com. Retrieved 2019-03-03.
- ^ Kim, Seung-kyung (April 2000). "Living with Rhetoric, Living against Rhetoric: Korean Families and the IMF Economic Crisis" (PDF).
- ^ "South Korea: Unemployment Rate (Source: The World Bank)".
- ^ a b Holmes, Frank. "How Gold Rode To The Rescue Of South Korea". Forbes.
- ^ a b "Government Reserves".
- ^ "South Korea Reserves - data, chart". TheGlobalEconomy.com. Retrieved 2019-05-15.
- ^ Aizenman, Joshua (30 November 2009). "Alternatives to sizable hoarding of international reserves: Lessons from the global liquidity crisis".
- ^ Kadogawa, Khut, Ong, Chalpat, Shimizu, and Wang, Yoichi, Vanne, Li Lian, Chalpat, Junko, and Hongbo (March 2018). "Asia and the CMIM in the Evolving International Monetary System". AMRO (Asean+3 Macroeconomic Research Office): 72.
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: CS1 maint: multiple names: authors list (link) - ^ Grubb, David (October 5, 2007). "Addressing Labour Market Duality in Korea" (PDF). OECD.
- ^ a b "Republic of Korea : Selected Issues". IMF. Retrieved 2019-12-04.
- ^ a b "IMF Executive Board Concludes 2019 Article IV Consultation with the Republic of Korea". IMF. Retrieved 2019-12-02.