South Korean Minister Sees Exports Rising More Than 10% in 2010

By Seyoon Kim and Shinhye Kang

Aug. 12 (Bloomberg) -- South Korea’s exports may increase by more than a tenth next year as demand from global customers picks up, Minister of Knowledge Economy Lee Youn Ho said.

“Our export competitiveness and technology have been strengthened over the years and this will play a big role once global economies pick up,” Lee, 61, said in an interview yesterday in Gwacheon. “We’re looking at an increase of about 10 percent, but we’re hoping for more” depending the world recovery, he said.

Exports, which make up more than half of Asia’s fourth- largest economy, will start rising from October, boosted by a weaker currency earlier in the year and a recovery in demand, the government said in June. The economy expanded at the fastest pace in almost six years in the second quarter as overseas shipments and household spending rose.

The ministry, which oversees trade, industry and energy policies, predicted last month that exports will fall 14.4 percent this year.

A weaker currency has helped South Korean exporters fare better than their Asian neighbors during the deepest global recession since the Great Depression. The won tumbled 28 percent against the dollar from the beginning of last year through April. Overseas shipments fell 12.4 percent in June, while Japan’s exports declined 36 percent and Taiwan’s slid 30 percent.

Higher Profits

Profits are growing thanks to robust demand for Korean-made products. Kia Motors Corp., South Korea’s second-biggest carmaker, today said its second-quarter profit more than quadrupled, helped by local and Chinese sales. Second-quarter profit at Samsung Electronics Co. climbed to the highest in more than two years, boosted by higher sales of televisions and mobile phones.

Lee said fiscal and monetary policy helped the nation’s economy weather the global slowdown, adding that policy makers shouldn’t rush to unwind measures that have supported growth.

The central bank kept its benchmark interest rate unchanged at a record-low 2 percent for a sixth straight month yesterday after cutting it by 3.25 percentage points between October and February. The government said it spent 68 percent of this year’s budget through July in an effort to frontload government sending and help the economy.

“Our fiscal and monetary policies have been prepared and implemented in a very sophisticated manner,” Lee said. “Of course, we need an exit strategy for the economy, but I don’t think this year would be a good time as the recovery isn’t strong yet. Preparation is needed, but an implementation of the exit strategy should be cautiously done.”

Stocks have soared 39 percent this year on rising investor confidence in the economy while the International Monetary Fund upgraded its forecasts this week for South Korea’s economic growth in 2009. The government on June 25 raised its 2009 GDP forecast, predicting the economy will shrink 1.5 percent this year, less than a previous estimate for a 2 percent decline.

Lee, who became minister in February 2008 with the start of President Lee Myung Bak’s administration, was chief executive officer at LG Economic Research Institute and also worked at the Federation of Korean Industries. He holds a PhD in economics from the University of Wisconsin-Madison.

To contact the reporter on this story: Seyoon Kim in Seoul at skim7@bloomberg.net; Shinhye Kang in Seoul at skang24@bloomberg.net