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South Korea Takes Steps to Stimulate Economy - 2003-05-19


South Korea's Central Bank cut the country's key interest rate this week by a quarter of a percentage point to four percent. The move is aimed at stimulating the economy, which is slowing due to weak consumption and the regional slump in travel and sales caused by Severe Acute Respiratory Syndrome.

JM Yun is head of research at the Korean Exchange Bank. He says the rate cut may be not do much for the economy, because the problem is not a shortage of cash in the financial system. "The sluggish[ness] of the Korean economy lies not in the absence of money supply but in the short[age] of demand," he said.

South Korea officials say the country has lost at least $450 million from a truck drivers' strike at the country's busiest port. The strike at Busan ended Thursday after the government agreed to reduce expressway tolls for drivers, and to use subsidies to cushion the effects of a fuel tax increase.

Chinese state media are reporting that retail sales in Beijing continued growing at double-digit rates in April, despite the SARS outbreak there. Consumer goods sales rose 14.6 percent compared with the same month last year. But analysts warn the real impact of SARS may not be felt until late May or June.

New Zealand posted a budget operating surplus of $2.3 billion this week. Finance Minister Michael Cullen is projecting the surplus will grow to $6.2 billion by fiscal year 2006-2007. But he warns economic growth is expected to halve over the next 12 months due to what he calls an "uncertain political and economic situation."

Japanese electronics giant Casio says it returned to profitability last year. The company posted a net profit of $49 million in the year to March, reversing last year's loss of about $210 million. Casio executives say cost cutting and a boost in demand for digital cameras and mobile phones helped lift the bottom line.

Vietnam Airlines has awarded ABN Amro and Citibank a $440 million finance contract this week for the purchase of new aircraft. It is the first deal guaranteed by the U.S. Export-Import Bank since the two countries signed a bilateral trade pact in July 2000.

Pending final approval, the Export-Import Bank will guarantee 85 percent of the deal's financing. Analysts say the deal is a sign that Vietnam's investment risk level has decreased to acceptable levels.

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