Kim says S. Korean financial crisis over

Kim says S. Korean financial crisis over

SEOUL, South Korea (AP): President Kim Dae-jung said Friday that South Korea has fully overcome a foreign exchange crisis that hit in late 1997.

It was the first time that Kim has boasted of a full victory over the financial crisis. He previously had maintained a cautious position on the issue.

"As I predicted, we have completely overcome the foreign exchange crisis in one and a half years," Kim told a meeting with civic leaders in the southern provincial town of Changwon.

Kim cited increased foreign exchange holdings, low interest rates and low inflation as evidence for his conclusion.

Kim took office two months after South Korea's economy was bailed out by the International Monetary Fund in December 1997. In his inauguration speech, Kim said he will try to get South Korea out of the crisis in 1 1/2 years.

Massive reforms linked to the IMF's record US$58 billion bailout forced thousands of financially weak companies to collapse, resulting in mass layoffs.

But South Korea's economy has since rebounded dramatically and is expected to grow by more than 9 percent this year, compared with minus 5.8 percent last year.

Kim said South Korea's foreign exchange reserves, which now stand at $68 billion, will continue to grow, helped by brisk exports and expanding current account surplus.

The number of jobless has also dropped from 1.78 million at the start of this year to 1.07 now, he said.

Kim also predicted that inflation will stabilize at the 1- percent level.

An IMF official said Friday that the IMF's current 6.5 percent growth forecast for South Korea this year is too low.

Flemming Larsen, the IMF's deputy director of research, said in a speech to business and government officials that he thought that South Korea's gross domestic product should grow closer to 9 percent.

"It's quite clear that our projection is too low," Larsen said.

The IMF made its projections for South Korea's economy two months ago, citing low interest rates and inflation and President Kim Dae-jung's strong macroeconomic policies.

Larsen said South Korea could now afford to adopt looser fiscal and monetary policies to stimulate domestic demand and spur economic growth, given its strong external surplus.

South Korea's state-run think tank, Korea Development Institute, projected last month that GDP grew by 11.1 percent in the third quarter, a sharp rebound from the 7.1 percent contraction in the same period a year ago.

While private economists see South Korea's economy growing by around 9 percent in 1999, official IMF forecasts have erred on the conservative side.