http://worldcat.org/entity/work/id/2288267083

Republic of Korea, statistical appendix

This paper analyzes the implications of global rebalancing in the post-crisis period for Korea and how high leverage in the household and small- and medium sized enterprises (SMEs) sectors could affect this process. Unlike in some other economies, most of the region, rebalancing in Korea is not about reducing excessive current account surpluses, but finding domestic engines of growth to reduce the export dependence of the economy and improve its resilience to external shocks. In fact, consumption and investment in Korea appear in line with that of peers, but there are limits to how much they could be sustained in the post-crisis world to pick up the slack from lower external demand. To avoid the buildup of vulnerabilities from high leverage, households have to increase their saving rate limiting consumption growth. On the other hand, export-oriented and large corporates may need to invest less with lower export demand increasing corporate savings further. This would leave small and medium sized enterprises (SMEs) in the nontradable sector as the engines for investment, employment, and household income growth, increasing the urgency to address their long-standing structural problems and weak balance sheets. Delaying the necessary adjustment would increase costs and financial vulnerabilities. Improving social safety nets and the pensions system would be important to manage the adjustment costs while increasing labor market flexibility.

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