Korea – unbalanced and unwonted

Korea’s economy is almost a poster child for economic imbalances.  It is dependent on increasingly concentrated exports. Domestic demand as a share of GDP continues to fall while corporates are hoarding cash rather than recycling the country’s excess savings – a legacy of the old development model of channelling the nation’s resources and energies into export-led growth.  In today’s low growth world that model is past its “use-by-date”.  Structural reforms are vital to reinvigorate domestic spending.  But they will take time to be implemented.  In the interim, lower oil prices will help.  But a weaker Korean won, particularly versus the yen, is still needed to maintain export market share and to provide resources to facilitate rebalancing.

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