Minister of Strategy and Finance Hyun Oh-seok also said slower growth in China, South Korea’s largest trade partner, would not create trouble for exporters if it meant a shift to consumption-led growth and away from high investment.
Hyun is in Washington for meetings of the G20 economies and the International Monetary Fund that opened amid a bitter U.S. political fight over raising the United States’ $16.7 trillion debt ceiling that has sparked worries a default could trigger a financial crisis that would ripple around the globe.
“If it is a short-term phenomenon, I would not expect a big effect on the Korean economy,” he told Reuters in an interview.
“It will be important to see how long it will last and the scope of the delay,” added Hyun, who is also deputy prime minister of Asia’s fourth largest economy.
Hyun gave a cautious endorsement of Abenomics - the three-pronged economic policy of Japanese Prime Minister Shinzo Abe that features massive monetary stimulus plan, flexible fiscal policies and structural reforms.
“Abenomics has a desirable aspect because it can positively affect the growth of the Japanese economy and contribute to global economic growth,” he said.
But Hyun echoed other trade partners of Japan and a G20 statement issued last month in Russia that warned against policies to weaken currency to make exports more competitive. A weaker yen would hurt competing South Korean exports.
“It is not clear if the foreign exchange issue is a part of Abenomics or the result of Abenomics,” he said, but it would “not be desirable” if Tokyo was targeting its currency.
Asked about a slowdown in Chinese growth to around 7 percent this year after years of double-digit growth, Hyun said what mattered to South Korea was the quality and sustainability of that growth.
“The core of the growth has transitioned from increased investment to increased consumption, so it is contributing to the global economic stability,” he said.
“Such changes in policies in China increase the sustainability of the Chinese growth, thereby contributing to the regional economy and to global economic stability,” said Hyun.
The shift to consumption-led growth that Beijing has committed to making would help South Korea increase the range of its exports to China, he added.