Korea – unbalanced and unwontedReport Date: 29th January, 2015
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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