Anchor: Despite a sluggish semiconductor industry driving down the International Monetary Fund’s 2023 growth outlook for South Korea, the Korea mission chief remains upbeat about the domestic prospects. Speaking to KBS World Radio’s Korea24, Harald Finger said the second half of the year is expected to bring improvements to the South Korean economy.
Choi You Sun reports.

Report: The IMF Korea mission chief says that the country's economy is still outperforming the average advanced economy.

Speaking to KBS World Radio's Korea24 on Tuesday, Harald Finger addressed his organization's recent point-two percentage point cut in South Korea's growth forecast for this year, pointing to improvements expected in the second half.

[Sound bite: International Monetary Fund Korea Mission Chief Harald Finger](03:46)
"Let me point to two things also that puts the forecast into perspective. One thing is that at one-point-five percent this year, growth in Korea is still above the average for advanced economies globally, which we project at just one-point-three percent this year. And two, over the course of the year, we expect to pick up in external demand, especially from China and the gradual normalization of the semiconductor cycle and this should support growth from the second half of 2023 onwards."

While stressing that uncertainties remain with regard to the timing and extent of recovery, the Korea chief also advised not to underestimate the impact of China's strong rebound on South Korean exports. 

The Chinese economy is expected to expand five-point-two percent this year, contributing to one-third of growth worldwide.

Looking ahead, Finger said South Korea faces the cyclical tasks of reining in inflation, fiscal consolidation, debt stabilization, and working through the ongoing housing market adjustment. 

He also noted that fundamental policy changes need to be made in light of the low birth rate and aging population.

[Sound bite: International Monetary Fund Korea Mission Chief Harald Finger](12:51)
"The nexus between declining productivity and the fast aging of the population and that points to longer-term fiscal challenges and calls for pension reform and structural reforms to enhance productivity for the economy. A second area maybe would be, as we discussed just now, to address the risks inherent in greater geoeconomic fragmentation to minimize the negative fallout there and improve the resilience of supply chains."

With regard to the Bank of Korea's monetary policy, Finger said he agrees with the central bank's decision to hold the key rate steady at three-point-five percent, but it will take time for the impact to emerge and that it is still too early to talk about a rate cut.

The full-length interview will air Tuesday evening, Korea time, on KBS World Radio's Korea24.
Choi You Sun, KBS World Radio News.