South Korea is worried by a steady deterioration in its current account in recent years, Finance Minister Kang Man-soo said on Monday, while declining to say if the remark suggested the government wanted a weaker won.
"What's important is not $7 billion or $10 billion but the fact that the (current account balance) continues to head downward straight as a trend," Kang said, referring to his ministry's forecast for this year's current account deficit.
Kang also said global economic conditions had weakened since South Korea's December 2007 presidential election, which then conservative opposition candidate Lee Myung-bak won with pledges to lift growth in Asia's fourth-largest economy.
Talking to reporters on the sidelines of the Asian Development Bank's annual meeting in Madrid, Kang refused to comment if the government wanted the central bank to lower interest rates to shore up the economy. A chronic deficit in services trade, such as tourist spending abroad by South Koreans in excess of income at home from foreign tourists, and high costs of imported commodities have sent the country's current account swinging into deficit.
The finance ministry forecast last month the country would post its first current account deficit in 11 years of up to $10 billion this year, compared with a $6 billion surplus in 2007.
Kang's previous warnings about the current account deficit were interpreted in the local currency market as indicating that he wants to hold down the won as a means to discourage South Koreans from spending abroad.
He declined to comment on the central bank's interest rate policy, but emphasised that the risks to the country's economy continued to worsen and that the currently high local inflation was mostly driven by costs rather than local demand. "Let me just remind you of such concepts as core inflation and cost-push inflation," he said, indicating that these are leading the current inflation.
Data showed last week that South Korea's consumer price index rose 4.1 percent in April from a year earlier, beating expectations and marking the highest in nearly four years.
It also marked the fifth month in a row that inflation topped the central bank's target of 2.5 percent to 3.5 percent on average for the 2007-2009 period. The Bank of Korea reviews interest rates on Thursday. It held the benchmark rate steady at 5.0 percent for the past eight months after having raised it in July and August last year.
Meanwhile, Deputy Finance Minister Shin Je-yoon told reporters South Korea was watching the international markets before it decides when to offer about $1 billion in sovereign bonds, widely expected during this year. "We have the feeling that the window is opening (for the bond offering). We need to watch more," Shin said.
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