¥°. Step-by-step measures
¢Ã < Major points of 2009 Economic Policy Directions >
¡Þ Short-term measures to maintain the current employment level
¡Þ Measures to prepare for the future
¡Þ Measures to enhance capabilities to revitalize the economy
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1. Short-term measures to maintain employment levels
- (Stabilizing the financial and foreign currency market) Lowering and stabilizing market interest rates, exerting continuous efforts to expand won/FX liquidity, increasing import/export finance support
- Increased support for Korea Ex-Im Bank, increased guarantee and insurance benefits to export businesses
¤· (Preemptive fiscal execution, regional finance reform) Executing 60% of fiscal investment in the first half, increasing regional finances to expand expenditure, amending regional tax laws
- Early budget allocation in December, simplifying procedures
¤· (Maintaining employment levels, creating new jobs) Instituting and expanding young adults' internship program, increasing employment maintenance support, reducing working hours
- Introducing and expanding young adults' internship program in SMEs¤ýpublic sector, increasing employment maintenance subsidy
- Wage support for 'job sharing' including paid training leave and reduced working hours
- Enhancing government-wide job creation efforts through fiscal injection and system improvement
¤· (Strengthening economic¤ýsocial safety net) Increasing support for 'new poverties' and low-income class suffering from the economic slowdown
- Emergency relief aid and permanent rental housing support for the underprivileged
- Expanding basic livelihood support program to increase support for people who became poor due to the economic slowdown, preparing measures to reduce blind spots in the program
- Better educational welfare, including increased school expenses support for low-income university students, improving educational environment of elementary and secondary schools, and enhancing early education for preschoolers
- Expanding support for working capital and guarantees for farmers and fishermen, extending tariff rate quota for raw materials and necessities
* 2009 tariff rate quota items : Fertilizers, agrichemical, fodder, flour, LNG, etc.
¤· (More efficient regulations for creating jobs) Less strict housing and land use laws, reforming corporate laws to promote job creation
2. Preparing for the future
- (Structural adjustments to increase competitiveness in the financial and corporate sector) Offering assistance for banks' capital expansion and bad debt settlements, liquidity support for corporations that may survive, encouraging early shutdown of marginal corporations
- Encouraging banks to carry out self-rescue measures through capital increase, payment delay of dividend and subordinated bond issuance
- Settling financial institutions' bad debts such as project financing loans through Korea Asset Management Corp.
- Carrying out pre-workout using Fast Track and "major shareholders' independent agreement" for corporations suffering from temporary liquidity shortage
- Amending Comprehensive Bankruptcy Law and other related regulations to support efficient structural adjustment
- (Nurturing future talents) Developing "Global young adult leadership program" to improve employment for young adults, and pursuing "nurturing the future industry with 100,000 young adult leaders" to prepare for future demand
- (Korean-style New Deal) Expanding SOC investments including development projects for the 4 major rivers and building a "Green Growth" infrastructure
- Improving social infrastructure including development projects for the 4 major rivers to increase domestic demand and create more jobs, and developing broad economic zones
(24.7 trillion won, 2.4% against GDP)
- Building infrastructure to stimulate "Green Growth" including developing the 4 major river regions as a recreational, cultural, and tourism resources, increasing railway investments including KTX expansion, and improving freight transportation system
- (Improving labor and industrial relations) Improving non-regular employment system and minimum wage system, and maintaining current employment level by tripartite agreement
- Less restrictive non-regular employment period, less strict employment regulations on industries hiring dispatched workers (currently 32 industries)
- Improving minimum wage system (amending the Minimum Wages Act) to increase employment opportunities and set a reasonable minimum wage
- Improving tripartite relationship to encourage more employment by corporations
- (Reformation of public enterprises) Constant efforts to improve public enterprises including reformation of National Agricultural Cooperative Federation and National Federation of Fisheries Cooperatives (such as changes in the ownership and governance structure), and improving their efficiency by 10%
- (Promoting international cooperation) Carrying out leadership role in the G-20 conference, expanding free trade agreements
3. Measures to enhance capabilities to revitalize the economy
- (Turning to a new technology industry) Expanding R&D investment to the level of advanced nations and broadening the new technology industry through commercialization support
- (Broadening the new technology industry) Nurturing and discovering new growth engine in various areas including green industry, high value-added service industry and other newly emerging industries
- Increasing R&D investments in new growth engine projects, revising laws and systems to create a new market environment
- (Greening major industries) Supporting green industries by combining major industries such as semi-conductor, steel and automobile industries with green technology
- Intensively supporting 9 major energy technologies
* Solar power, wind power, hydrogen fuel battery, clean fuel, IGCC, CCS, storing energy, LED, Power-IT
- (Going Overseas) Securing foreign resources and increasing investments towards foreign corporations
- Acquisition of promising foreign corporations dealing in energy, resources, and low-carbon green technology by using assets commissioned to KIC and diversifying asset operations
- (Maximizing the economic potential) Establishing a Global Korea Network and encouraging foreign talent influx
- Formation of a global network to encourage interactions between society of Koreans living overseas and the domestic Korean society (to be carried out from 2009 to 20011)
- Improving visa and immigration system to encourage foreign talent influx in the areas of finance and science
- (Revising pension and insurance system) Preparing for the future through a new pension and insurance system
- National pension system to be changed to a professional, independent and civilian Fund Operation Committee to increase operational profits
- Enhancing care systems for the unemployed by preparing efficient management measures for health insurance expenditure and introducing experience rate to the employment insurance system
II. 2009 Economic Outlook
(Deteriorating economic conditions) With the global economic crisis spilling over into the real economy, the difficulties are expected to continue
- Primary institutions also expect difficult times in 2009
(Determined efforts are required) Preemptive, decisive and sufficient measures are essential for an economic recovery and to maintain employment rate
- Increasing liquidity supply, carrying out increased tax cuts and fiscal expenditure (2008~2011 79 trillion won), strengthening economic¤ýsocial safety net to protect the underprivileged, low-income class, SMEs, farmers and fishermen
(Return to normal growth in 2010) Depending on the efforts of the government, the crisis may be overcome earlier than expected
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Korea's trade balance has turned to a surplus for the first time in the last 6 months. This is attributed to increased exports of petroleum products and ships.
Import growth has declined sharply due to the reduced cost of crude oil (from US$115 billion in Sep. 2008 to US$98 billion in Oct. 2008).
The amount of ship exports has returned to the highest level among export items since May of 2008 on a monthly basis, reaching US$4.17 billion as of Oct. 2008.
Overview
¡á Exports rose 10 percent to $37.89 billion and imports amounted to $36.67 billion, up 12 percent compared to the same month of last year, producing a $1.22 billion surplus
¡á The return to a surplus in the trade balance in the last five months is attributed to the increase in exports of key items and the decline in imports driven by the reduced costs of oil and raw materials.
- Export growth of vessels and petroleum products has continued to increase to 118% and 45% respectively while exports for IT products (semiconductors, computers, household electronics etc.) except wireless communication equipment (14%) have slowed due to the decline in prices and demand.
- Crude oil imports have slowed by $1.05 billion from the previous month due to lower unit price of crude oil (¡â14.8%) and imports for petroleum products and steel manufactures have converted into the decline by $0.88 billion and $0.89 billion respectively.
The trade balance will remain in the black until the end of this year given the declining prices of oil and commodities although export growth is expected to decline.
Export growth has increased to a double-digit rate of 10% due to rising exports for major products and strong demand from emerging countries in Latin America and Middle East.
- Exports for ships, petroleum products and steel manufactures have increased sharply among key export products.
Exports for ships were driven by favorable conditions in the shipbuilding industry, for petroleum products by strong demands in Asian countries and for steel manufactures by an increase in demand for cold rolled steel and hot rolled steel.
However, exports for IT products (semiconductors, computers, household electronics, liquid crystal display devices etc.) and petrochemicals have decreased due to the decline in global demand and the reduction in export prices respectively.
- Regional export growth from Oct. 1st to Oct 20th
Double digit export growth in the following regions:
* Latin America (32.1%), Middle East (22.4%), Oceania (20.9) and the U.S. (10.8%)
On the other hand, export growth in ASEAN (6.3%) and Japan (5.5%) China(¡â1.8%) and EU (¡â8.2%) has slowed.
Import growth has increased to 12.0% due to slower imports for crude oil and raw materials.
- Import growth for raw materials has risen 22.2% from one year earlier but import growth for crude oil (¡â13%), petroleum products (¡â44%) and steel manufactures (¡â20%) has been down from the previous month due to the drop in prices and weaker demand.
* Import growth for raw materials has been slowed from 30.2% during Oct. 1st~20th in 2007 to 22.2% during the same period in 2008.
The price of 5 key import items having a large raw material component remains high.
* The unit price of the imports for crude oil (28%), coal (97%), petroleum products (29%), gas (53%) and steels (49%) has increased from Oct. of the last year.
- Import growth for capital goods and consumer products has headed downward due to slower equipment investment and weaker consumer spending.
* Import growth for capital goods decreased from 26.0% during Oct.1st~20th in 2007 to ¡â3.2% during the same period in 2008.
* Import growth for consumer products decreased from 36.8% during Oct.1st~20th in 2007 to ¡â12.8% during the same period in 2008.
In conclusion, the trade balance on a monthly basis has returned to a surplus of US$1.22 billion for the first time in the last 6 months.
¡Ø Source
- This report is based on data provided by the Korea Customs Service and Korea International Trade Association (KITA).
- Total amounts of exports and imports are estimated on a customs clearance (provisional figures) as of Oct. 31st of 2008.
- The figures for exports and imports by product and region are also estimated on a customs clearance (provisional figures) by Oct. 20th of 2008.
- Export trend amounts for key products are estimated and based on consultations with officials at the Ministry of Knowledge Economy in charge of each product.
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The Korean Government¡¯s Policy Measures and Economic outlook for 2009
1. Recent economic conditions
The financial crisis originated from the U.S. has been spreading into the world economy with a fear of long-term economic recession and unprecedented uncertainty in the global financial market has expanded the concerns over a possible slump in stock prices.
The foreign exchange market is being gradually stabilized owing to the currency swap agreement between Korea and the U.S. (Oct 30) but the secondary financial institutions and SMEs have witnessed worsening liquidity amid fluctuations of stock price index at around 1000 points and interest rates¡¯ increase.
With respect to the real economy, economic growth has been shrunk and a slump in employment has continuously lingered with sluggish domestic demand continuing.
- Korea¡¯s current account registered a deficit of $13.8 billion until Sep but is expected to turn to a surplus of about $1.5 billion after Oct.
- Korea¡¯s trade balance posted a surplus of $1.22 billion in Oct 2008 with import growths slowing down to 12% although exports have decreased to 10.2% due to base effects brought on by a significant increase of 22.9% in exports year-on-year.
2. Policy measures to overcome economic crisis
First, the government will preemptively remove uncertainty in the currency and financial markets stemming from the global financial crisis.
Second, the government will expand fiscal expenditures in an attempt to sustain jobs and facilitate the real economy.
Third, the government will prepare ways to ease the economic burden of SMEs and ordinary people.
3. Action plans
Based on market stabilization, the government will focus on securing liquidity by increasing currency swap deals and expanding foreign exchange reserves and maintain its efforts to stabilize exchange rates.
- Supply of liquidity will be increased to banks, securities firms, and asset management firms in a bid to seek stability in the domestic financial market and further efforts will be made such as improved requirements for issuing bank bonds to keep lower interest rates.
- Moreover, additional investment will be provided by state owned banks (Korea Development Bank, Industrial Bank of Korea, Korea Eximbank), Korea Credit Guarantee Fund and Kibo Technology Fund, and Korea Housing Finance Corporation so as to expand financial support for SMEs.
In order to revitalize the real economy, the Korean government will increase fiscal expenditures, facilitate real estate markets and construction activities, and promote investments through reforming regulations.
- The government will inject a state budget of 14 trillion won to keep jobs and boost domestic demand, expecting a growth rate rise of 0.5%.
¤ý11 trillion won will be earmarked including 1 trillion won in public corporations investment, centered on social overhead capital (SOC) and stabilization of people¡¯s livelihood such as support for SMEs and small business owners.
¤ý 3 trillion won will be spent for tax cuts in a hope of expanding investment by private sectors.
¤ý Fiscal expenditures will be implemented earlier than scheduled (50% in the first half of this year, around 60% in the first six months of 2009).
- In addition, the government will prevent a slowdown in real estate and construction activity from spilling into the insolvency of financial institutions.
¤ýExcessive regulations imposed upon reconstruction of apartment buildings and real estate speculation will be eased. For example, Real Estate Speculation Zones will be released and resale restrictions in the metropolitan areas will be relaxed. In addition, transfer tax exemption will be expanded for local housing for actual demand.
- The The government will also lift regulations regarding land, environment, and labor.
¤ý Land use restrictions in Population Control Zones and Nature Conservation Zones will be rationalized. Environmental regulations deemed excessive compared to those of competing countries will be reviewed and streamlined, being converted to total mass emission control from location restrictions. Regarding labor issues, the employment system for temporary workers and dispatched workers will be improved to minimize the side-effect of laws such as job instability of non-regular workers.
- With a view to stabilize SMEs and people¡¯s livelihood, the government will strive to expand financial support for SMEs, lower mortgage loan interest rates, provide financial support for low income families, and lower credit card fees.
¤ý Efforts will be made to tackle youth unemployment problems and to reinforce support for the unemployed and low income students.
4. Economic outlook for 2009 considering the policy measures
The 2009 economic growth in Korea is expected to post about 4% considering the policy measures (KRW33 trillion, 1%p) which include the previous measure (KRW9 trillion), the existing tax reduction bill (KRW10 trillion), and the measure this time (KRW14 trillion), but given only the external and internal conditions in an objective manner, it is projected to be approximately 3%.
* The global economy is predicted to head for a prolonged recession.
Concerning employment, the number of people employed will be growing by about 200,000 considering the policy measures but given only the external and internal conditions objectively, the figure is expected to rise by 120,000~130,000.
Furthermore, the current account for 2009 is projected to turn to a surplus of $5 billion roughly owing to a drop in oil prices and consumer prices are expected to settle in the downward tendency, in 3% range affected by a decline in raw materials prices and sluggish domestic demand.
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 Key Frameworks for for Korean Financial Market StabilizationKorean Financial Market Stabilization
Resilience AmidstResilience AmidstTurbulence
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1. Foreign Debt Total
¡á Recent debts have largely been incurred by bridge-financing (based on anticipated future returns) such as currency forwards; This is in stark contrast to massive foreign currency short-term borrowings induced for excessive investment by Korean Chaebols that led to the 1997 financial crisis.
• As of the end of June 2008, $151.8 billion out of $419.8 billion total in external debts are estimated by BOK to be borrowing with little risk reducing the actual external debt size to $268 billion.
• Excluding debts with little risk, actual net foreign asset amounts to $154.5 billion. ¡á The ratio of external debt within 1 year maturity to foreign reserves as of the end of June 2008 stands at 86.1%; however, the figure falls to 54.4% when foreign banks branches are excluded, significantly reducing external debt risk
2. External Debt-by-Sector
A. Government sector debt
¡á The majority of government sector debt ($51.8 billion out of $63.1 billion) consists of KRW-denominated government bonds and currency stabilization bonds purchased by foreigners, for which the Korean government and the BOK has sufficient repayment capacity.
¡á The remainder consists of $3.3 billion in foreign currency-denominated Korean government bonds, $3.4 billion in public loans, etc. (i.e. long-term external debts that pose little risk)
B. Banking sector debt
¡á External debts with little risk, incurred from shipbuilders' currency hedging, etc. account for 44.6%, or approx. $93.8 billion, of total banking sector external debt.
¡á External debts incurred by domestic branches of foreign banks pose little risk compared with those of Korean banks because the liquidity is managed by headquarters.
* foreign bank branches hold 43.1% of total banking sector external debts, and 57.7% of banking sector external short-term debts. ¡á We are applying FX liquidity criteria to domestic banks much stricter than in other countries; our current FX liquidity level remains stable.
* developed nations such as the US, UK, Japan, and Germany do not regulate FX liquidity; only some countries do, including China and Mexico.
• Mismatch ratios for foreign assets and debts maturing within 7 days, 1 month, and 3 months are within stable range
C. Other sectors (non-bank FIs, non-financial corporations)
¡á The majority of non-bank financial institutions¡¯ external debt ($20 bn out of $28 bn) belong to credit card companies and lease companies. They have stable financing abilities and operational structures.
• A high proportion of debts are long-term, while assets are mainly short-term such as credit card receivables.
* This contrasts with the practice of short-term borrowing and long-term lending by Korean merchant banks that led to the 1997 financial crisis.
• Credit card companies and lease companies use currency swaps in managing KRW assets: as long as they have enough KRW, they can secure foreign currency through currency swaps. ¡á Of the $118.2 bn in external debt held by non-financial corporations, $50.9 bn are advance receipts for shipbuilding orders and $7.1 bn are loans from Foreign investors which is regarded as FDI. In other words, almost half (49.1%) of non-financial sector external debt is without repayment burden.
1. Definition of ¡°Usable Foreign Reserves¡± and the Current Composition of Foreign Reserves
¡á Usable foreign reserves: the same concept as foreign reserves.*
* External assets that are readily available to and controlled by monetary authorities for direct financing of payment imbalances, for indirectly regulating the magnitudes of such imbalances through intervention in exchange markets to affect the currency exchange rate, and/or for other purposes (IMF definition). 
• The foreign reserves figures released at the beginning of each month all refer to usable foreign reserves
- the definition of foreign reserves in the statistics since August 1999 has been clarified to mean reserves of foreign assets immediately convertible to cash (usable foreign reserves), in line with IMF definition.
Ex) the $2 bn from the Foreign Currency Equilibrium Fund invested to Merrill Lynch through the KIC are excluded from foreign reserves.
¡Ø statistics prior to August 1999 featured (official) foreign reserves and usable foreign reserves separately.
(foreign reserves = usable foreign reserves + deposits in foreign branches of Korean banks + currency swap agreements with the Bank of Thailand) ¡á The current composition of foreign reserves
• Korea¡¯s foreign reserves currently consist of deposits and safe assets including government bonds, government agency bonds, international organization bonds, etc.
* A is the officially required minimum rating for foreign reserve assets, but their actual ratings are AA or above.
• All of the $239.7 bn in foreign reserves as of the end of September 2008 are immediately convertible to cash.
2. Analysis on the Adequacy of Foreign Reserves
Korean banks have been encountering some difficulties securing overseas funding as a result of disruptions in the global credit markets following the collapse of Lehman Brothers. Offers of over-one month loans have been nearly disappeared in foreign currency markets, and overnight Call rate sharply increased following the dollar shortage.
In the USD/KRW swap market where banks can procure USD alternatively, excessive demand for dollar funding lowered the swap point and swap basis.
Despite these difficulties, Korean banks have been faring relatively well as they had surplus funds remaining from the first half of the year. They have also been able to secure a certain level of funding on the back of their strong credit relationships with foreign lending institutions.
As of September 30, the foreign currency liquidity ratio of domestic banks was above the recommended level of 85%. The 1-month and 7-day gap ratios were also above the recommended -10% and 0%, respectively.
Since concerns over the U.S. subprime market were first raised last year, we have stepped up monitoring of major economic indices. We have also been closely watching the foreign currency liquidity of domestic financial institutions and encouraging them to manage their foreign currency liquidity risk and exposure to mortgage-related products to ensure that they remain financially sound.
As results, every soundness ratio of Korean banks relevant to foreign currency is above the levels which supervisory regulations recommend. Moreover, the delinquency rate on bank loans is very low and stable. Even BIS and IMF rates the banks as credible recourse debtors.
In case of foreign banks¡¯ Korean branches, they have a bare possibility to collect their loans and funds all at once because of the arbitrage opportunities. The branches borrow foreign currency at a low rate from their headquarters and transact F/X SWAP with Korean banks (Sell&Buy). With supplied Korean Won from the transaction, they invest in safe assets, such as Korean government bonds. Even if they collect their funds, the impact on F/X spot market seems to be limited.
Recently, Korean banks have been encountering some difficulties securing overseas funding as a result of disruptions in the global credit markets following the collapse of Lehman Brother in September. But the difficulties mostly stem from domestic banks¡¯ to deal with the maturing debt without using their foreign currency assets so as not to disrupt foreign currency credit flows to the market.
On October 6, the government began to inject US$5 billion in fresh foreign currency credit to local banks through the Export-Import Bank of Korea. Given government support and the foreign currency liquidity ratio of domestic banks, the global credit crunch is likely to have limited impact on domestic financial institutions and the real economy. Overseas borrowing conditions are also expected to improve as the U.S. House of Representatives passed the bailout package on October 3.
Recently concerns were raised over a possible deterioration of banking soundness as lending growth slowed along with economic slowdown. However, banks' financial health such as profitability, asset soundness and capital adequacy are in good shape.
Korea also has an excellent record in the first half in terms of net income(6.7 trillion won), ROA(0.9%) and ROE(12.5%) compared to major advanced nations.
Deliquency rate(1.0% at end-August 2008) and NPL ratio(0.7% at end-June 2008) also remained relatively low.
* Commercial banks in the U.S. have a deliquency rate of 3.16% and NPL ratio of 1.87% as of the end of June 2008. Regarding capital adequacy, BIS ratio(11.55% of Basel¥°, 11.36% of Basel¥±) is similar to that of advanced countries* as of the end of June 2008 today.
* There is not much difference between Korea and major advanced nations such as the U.S(12.23%) and the U.K.(12.05%). There is a possibility for degradation of banking soundness due to a prolonged economic slowdown but it is not likely to happen so abruptly like the US sub-prime crisis. The loss absorption capacity** is also in good shape thanks to strengthened supervision policy*.
* Korea has strengthened mortgage related regulations such as LTV and DTI. It also raised minimum reserves for bad household and corporate debts
** Coverage ratio: 186.0% Tightened policy measures are in place as a response to unstable factors in each sector that raises concerns for default risks such as SME loan.
Looking at recent trends in lending, bank lending growth has slowed in the third quarter owing to the effects from economic slowdown and strengthened risk management.
* Monthly(Monthly average) bank lending growth(trillion won)
SME lending : (¡®07) 5.7, (¡¯08.1/4) 5.2 , (¡®08.2/4) 6.5, (¡¯08.3/4) 3.9
Household lending : (¡®07) 1.5, (¡¯08.1/4) 1.4, (¡®08.2/4) 3.0, (¡¯08.3/4) 2.2
PF lending : (2007) 1.3, (¡¯08.1/4) 0.7, (¡®08.2/4) 1.3, (¡¯08.7) 0.4 Deliquency rate has increased a bit but it is not historically high and coverage ratio is good enough.
* Lending Status(%)
SME lending : Deliquency rate (End of March 2004)2.8, (End of 2007)1.0, (End of August 2008)1.5, Coverage Ratio (End of June 2008)138.4
Household lending : Deliquency rate (End of 2003)1.8, (End of 07)0.6, (End of August 2008)0.7, Coverage Ratio (End of June 2008)259.2
PF lending : Deliquency rate (End of ¡®07)0.5, (End of March '08)0.9, (End of July 2008)0.9, Coverage Ratio (End of July 2008)187.5 However, deliquency rate(0.5%) of mortgage loan, a huge share of household lending(about 60%) is very low and LTV(47%) is also fine.
For future readiness, policy efforts have been made to preemptively respond to possible default risks by monitoring each bank, thereby continuously enhancing soundness supervision.
For SME lending, greater liquidity support has been extended for cash-strapped SMEs
* The Korean government announced its plan to help SMEs hurt by a credit crunch on Oct. 1. For household lending, the government will encourage long-term loans and provide credit recovery support in order to reduce the burden of debt payment for borrowers in the lowest income brackets according to schedule.
For PF lending, preemptive measures were prepared as a response to an abrupt recession in the real estate sector owing to measures dealing with unsold new housings(6.11, 8.21) until now and strengthened risk management*
* Risk Management Standard for PF(September 30th) Deposit-loan ratio(including CD) of domestic banks stand at 105.4% as of July 2008 today(The figure goes up to 86.8% if bank bonds are included).
It is reasonable to include CD because the nature of CD is very similar to deposits.
Deposit-loan ratio has somewhat increased due to a rise in lending but it is no cause for concern given local-currency based liquidity ratio (106% at the end of July 2008).
* It is higher than Japan (74% including CD) but lower than the U.S. (100~110% including CD). On the other hand, lending growth has slowed recently because of the effects from economic slowdown and higher interest rate and deposit-loan ratio is expected to improve accordingly.
In respect to PF lending, the government will manage risks preemptively through measures such as Risk Management Standard for PF(September 30th) and fortify soundness supervision based on the result of study on 899 construction business funded by PF(To be completed during October)
- Encourage restructuring for savings banks with possible default risks in a manner minimizing the market impact such as M&A
SME lending trends and soundness of each bank will be closely monitored. Preemptive measures will be mapped out such as ways to help financially distressed SMEs due to a credit crunch as it was announced by the government(Oct.1) in order to prevent possible spread of default crisis.
In terms of household lending, the government will closely watch if there is any additional burden of debt repayment due to interest rate hike and trends change in the real estate market. It will also provide people in the lowest income bracket who are vulnerable to external shocks with greater support such as credit recovery support program.
Regarding the real economy such as construction sector, the government will make various efforts. First, it will pursue support led by financial companies such as work-out programs and agreement to construction company. Second, it will make institutional improvements that hamper financing through fixed assets such as unsold new housing. Third, it plans to support small(SME) companies suffering from losses related to currency option contracts - known as "knock-in knock-out(KIKO)" options through Korea Credit Guarantee Fund(KODIT) and Kibo Technology Fund(KIBO).
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 Comprehensive Policy measures to Overcome the Ongoing Economic Difficulty
Key Issues on Korean Economy (MOSF)
 Current Issues & Answers
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Mar 11, 2009
