(Reuters) - South Korean President Park Geun-hye warned the economy is at risk of falling into long-term stagnation and urged for speedier handling of economic law bills in parliament.
Low growth, low inflation and a weak Japanese yen JPY=, along with a fast-ageing population, were key economic risks, Park said in a televised speech in parliament, noting that the country was at a crossroads between growth and stagnation.
Park's remarks come as indicators underline worsening consumer confidence and weak global demand. Finance Minister Choi Kyung-hwan has held a similarly bleak assessment of the economy since introducing a series of stimulus measures in July.
"We are at the crossroads between achieving another leap forward and falling into a stagnation, and this is the golden time to rebuild the economy," Park said, while the government submitted next year's budget bill to parliament.
Asia's fourth-largest economy will probably pick up to grow around 3.5 percent this year from 3.0 percent in 2013, Park said, but she added the economy was still in crisis as the outlook remained uncertain both locally and globally.
The won KRW= pared losses while bond futures rose as Park's renewed warning of long-term stagnation reinforced the market's view the central bank could loosen monetary policy.
RATE CUT CHANCES RISE
The government is seeking parliamentary approval for next year's budget bill, including plans to increase fiscal spending by 5.7 percent to 376.0 trillion won ($359.4 billion) from this year - a bigger increase in spending than previously projected.
The country's fiscal year starts on Jan. 1 and parliament is due to finalise the budget plans by Dec. 2, although it has frequently missed the deadline. The Bank of Korea was seen under pressure to cut rates, the fourth time it would do so since the middle of last year.
"On the surface, I think her comments were mainly aimed at arousing public pressure over the main parties to finalise next year's budget bill in time, but these remarks helped reinforce expectations among traders for a fresh rate cut," said Park Sang-hyun, chief economist at HI Investment and Securities.
The Bank of Korea cut its benchmark interest rate KROCRT=ECI by a total of 75 basis points in three steps since May last year and traders were almost equally split over the likelihood of another rate cut, Park of HI said.
The won was trading at 1,047.6 per dollar at 0351 GMT, off a session high of 1,045.6. December futures on three-year treasury bonds KTBc1 were up 0.02 points at 107.88. President Park reiterated her commitment to transforming the economy into a more balanced one between manufacturing and service sectors and between exports and domestic operations.
South Korea's economy is heavily influenced by a few big manufacturing-based business conglomerates, such as Samsung Electronics (005930.KS) and Hyundai Motor (005380.KS), and Park has pledged to change the structure.
But her government has not taken any bold steps toward weakening the power of the conglomerates, known as chaebol, but is instead trying to encourage the creation of smaller companies and expand financial support for smaller enterprises.
Government data shows the combined annual sales of the country's top five chaebol amounted to 831 trillion won in 2013, equivalent to 58 percent of the country's annual gross domestic product - up from 40 percent in 2004.
reuters.com
Low growth, low inflation and a weak Japanese yen JPY=, along with a fast-ageing population, were key economic risks, Park said in a televised speech in parliament, noting that the country was at a crossroads between growth and stagnation.
Park's remarks come as indicators underline worsening consumer confidence and weak global demand. Finance Minister Choi Kyung-hwan has held a similarly bleak assessment of the economy since introducing a series of stimulus measures in July.
"We are at the crossroads between achieving another leap forward and falling into a stagnation, and this is the golden time to rebuild the economy," Park said, while the government submitted next year's budget bill to parliament.
Asia's fourth-largest economy will probably pick up to grow around 3.5 percent this year from 3.0 percent in 2013, Park said, but she added the economy was still in crisis as the outlook remained uncertain both locally and globally.
The won KRW= pared losses while bond futures rose as Park's renewed warning of long-term stagnation reinforced the market's view the central bank could loosen monetary policy.
RATE CUT CHANCES RISE
The government is seeking parliamentary approval for next year's budget bill, including plans to increase fiscal spending by 5.7 percent to 376.0 trillion won ($359.4 billion) from this year - a bigger increase in spending than previously projected.
The country's fiscal year starts on Jan. 1 and parliament is due to finalise the budget plans by Dec. 2, although it has frequently missed the deadline. The Bank of Korea was seen under pressure to cut rates, the fourth time it would do so since the middle of last year.
"On the surface, I think her comments were mainly aimed at arousing public pressure over the main parties to finalise next year's budget bill in time, but these remarks helped reinforce expectations among traders for a fresh rate cut," said Park Sang-hyun, chief economist at HI Investment and Securities.
The Bank of Korea cut its benchmark interest rate KROCRT=ECI by a total of 75 basis points in three steps since May last year and traders were almost equally split over the likelihood of another rate cut, Park of HI said.
The won was trading at 1,047.6 per dollar at 0351 GMT, off a session high of 1,045.6. December futures on three-year treasury bonds KTBc1 were up 0.02 points at 107.88. President Park reiterated her commitment to transforming the economy into a more balanced one between manufacturing and service sectors and between exports and domestic operations.
South Korea's economy is heavily influenced by a few big manufacturing-based business conglomerates, such as Samsung Electronics (005930.KS) and Hyundai Motor (005380.KS), and Park has pledged to change the structure.
But her government has not taken any bold steps toward weakening the power of the conglomerates, known as chaebol, but is instead trying to encourage the creation of smaller companies and expand financial support for smaller enterprises.
Government data shows the combined annual sales of the country's top five chaebol amounted to 831 trillion won in 2013, equivalent to 58 percent of the country's annual gross domestic product - up from 40 percent in 2004.
reuters.com
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