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SKorean finance chief worried about Eastern Europe

 Yoon Jeung-hyun, minister of Strategy and Finance, gestures during a press conference at the Seoul Correspondent Club in Seoul, South Korea, Thursday...
 Yoon Jeung-hyun, minister of Strategy and Finance, listens to a question during a press conference at the Seoul Correspondent Club in Seoul, South Ko...

South Korea Economy

Yoon Jeung-hyun, minister of Strategy and Finance, gestures during a press conference at the Seoul Correspondent Club in Seoul, South Korea, Thursday...

South Korea Economy

Yoon Jeung-hyun, minister of Strategy and Finance, listens to a question during a press conference at the Seoul Correspondent Club in Seoul, South Ko...

South Korea's finance minister expressed concern Thursday that a potential meltdown in Eastern Europe could spread, worsening the financial turmoil in Western Europe and around the world.
"As Eastern European economies are exposed to a possible financial crisis, worries over additional global financial turmoil increase, causing foreign exchange rates, interest rates, and stock prices to fluctuate," Minister of Strategy and Finance Yoon Jeung-hyun said in a speech to foreign media organizations.
Elaborating later, Yoon also said there were probably concerns that Western European countries and financial institutions with exposure to the region could "find it difficult to function properly" in the event of severe turmoil in Eastern Europe.
"In such a crisis situation, of course, we think that the effects will also spill over to a global crisis," he said during a question-and-answer session.
We "do not believe that South Korea will be free from the effects of that crisis," Yoon said, although he added that the South Korean economy ultimately was unlikely to suffer severely as it does not have much direct exposure to Eastern Europe.
Fears about Eastern Europe have sparked concerns in South Korea, where markets and economic growth have been hit hard by the global credit crunch and slowdown, that it could find itself caught up in further investor wariness of emerging economies. South Korea was one of the countries battered worst by the 1997-98 Asian financial crisis.
Last month, credit ratings agency Standard & Poor's said "all the ingredients for a crisis are in place" in Eastern Europe because of rising government debt and a heavy reliance on foreign lending.
The central banks of the Czech Republic, Bulgaria, Poland, Romania and Slovakia issued a statement Wednesday, saying reports the region's banks were in danger were "misleading" speculation and only increased the risk to stability.
South Korea's economy has suffered amid the sharp global slowdown as overseas demand for the country's cars and electronics products wilts. Exports and industrial output have plummeted.
The economy shrank 3.4 percent in the fourth quarter, the first such decline in a decade. Government and private forecasts see gross domestic product contracting in 2009 for the first time since 1998.
South Korea's benchmark stock index has fallen sharply since last year and the country's currency, the won, has plummeted against the dollar, stoking fears the country's banks may not be able to pay off foreign loans.
The government has scoffed at speculation of an impending crisis, citing South Korea's trove of foreign currency reserves, the world's sixth-largest, as well as swap deals with the U.S. Federal Reserve and other central banks. Yoon reiterated that position Thursday.
South Korea's currency has been trading at its lowest levels in 11 years, though stabilized somewhat after approaching 1,600 to the dollar earlier this week. The won, which declined about 26 percent against the greenback last year, has fallen another nearly 20 percent so far in 2009.
Despite South Korea's difficulties, Yoon said the country will recover through government efforts to gain market confidence and policies, such as supplementary budgets and expanded credit guarantees, to stimulate the economy.
He said South Korea must be ready for the "high growth potentials that will follow the crisis."


Updated : 2021-10-16 22:44 GMT+08:00