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South Korean Economy Still Weak - 2001-08-23


South Korea has completed repayment of a multi-billion dollar loan it accepted from the International Monetary Fund during the height of the Asian financial crisis in 1997. The accomplishment is being overshadowed by concerns of another downward turn in the South Korean economy.

The government in Seoul says it paid the last installment on the $19.5 billion loan Thursday completing the repayment nearly three years ahead of schedule.

Financial analyst Hank Morris in Seoul believes it is a major achievement given that the country's economy was on the verge of bankruptcy four years ago. South Korea accepted the loan as part of a record $58 billion emergency rescue package. "They are able to repay early because the country is not importing nearly as much as it was and so they have been building up a very positive trade and current account surplus," he said. "As a result, the country now has a huge amount in foreign exchange reserves."

But most South Koreans say they are feeling uncertain about the future.

The country is again facing economic troubles amid a sharp drop in exports and the economic slowdown in the United States. The Korean central bank says the country's economy grew just over 2.5 percent in the second quarter of this year the worst quarter for growth since early 1999.

There are also concerns that the government has not implemented enough structural reforms to withstand a prolonged economic slump. In exchange for the loan, South Korea had promised the IMF that it would reform its financial sector and rein in the activities of giant family-owned conglomerates, known as chaebols. Hank Morris. "There are structural problems that remain and this is clearly catching up with Korea at this stage," he said. "The planned economy structure that Korea had has led to the current situation where there is a high level of concentration of high-tech businesses. Those things are not performing well anywhere in the world right now, so Korea is suffering as a result."

Still, most analysts do not expect South Korea to turn to the IMF again any time soon. They note the country has rebuilt its credit standing with international lenders. It also has a hefty foreign exchange reserve now of almost $100 billion to cushion the impact of a global economic slump.

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