South Korea central bank chief says unsure economy can avoid emerging market challenges

SEOUL: South Korea's central bank governor said on Monday he was unsure whether the economy can continue to avoid many of the challenges confronting other emerging market countries in the face of persistent external risks. "South Korea has shown it is different from other emerging market countries since last May, amid heightened uncertainties in global financial markets," Governor Lee Ju-yeol said in a speech at a seminar in Seoul.

"However, I cannot remain confident that this differentiation will continue, due to the imbalances in our economy that have accumulated."

Many emerging market countries have struggled with volatile capital flows and currency valuations as the US Federal Reserve flooded markets with cheap dollars through its quantitative easing strategy, and weak demand undermined exports.

Lee stressed the importance of spreading resources to domestic consumption sectors, including the service sector, and to promote spending and investment to ease the imbalance between exports and domestic consumption.

The central bank chief pointed out South Korea's capital market was underdeveloped, keeping new businesses from thriving, although he did not detail what measures could be taken to remedy the situation.

Lee took office early in April and displayed a hawkish stance at his policy debut on April 10 when the central bank held interest rates steady at 2.50 percent for an 11th month.