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SEOUL: South Korea will take a cautious approach to unwinding its economic stimulus policies in light of uncertainties at home and abroad, Finance Minister Yoon Jeung-Hyun said Monday.
Asia's fourth-largest economy was one of the fastest to emerge from the world downturn thanks partly to aggressive government stimulus measures.
But Yoon, in a speech to foreign correspondents, cited a "lacklustre" employment situation at home and recent sovereign debt worries in Dubai and the eurozone as risks.
To strengthen the foundations for longer-term growth, the Korean government would continue "active policy support in macroeconomic policies", he said.
"It is necessary to maintain the current accommodative policy stance in order to deal with unexpected instabilities in the domestic and global market."
In terms of an exit strategy, the government "will take a cautious and balanced approach" to avoid "unwinding such policies too early, and maintaining intervention measures for too long".
Yoon said the recent slight slowdown in South Korea's growth appeared largely due to seasonal factors such as a cold spell and heavy snow.
"Therefore, I see no reason to doubt that the economic activity will continue a moderate pace of recovery in 2010," he added, reaffirming a projection of five per cent GDP growth this year.
The minister, speaking three days before the central bank's monthly policy meeting, said it is not the right time to raise the benchmark rate from the current record low 2.0 per cent.
"The private sector is not riding on a full-scale recovery and conditions in the job market are serious," he said. "Household debt also amounts to 700 trillion won (US$616 billion)."
However, Yoon said adjustments to the policy rate should not come too late or too early.
- AFP/yb
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