Deputy Prime Minister Hong Meets with IDB, WB, and IMF, the Three Major International Organizations: "Expansionary Fiscal Policy for Next Year"

Hong Nam-ki, Deputy Prime Minister and Minister of Economy and Finance, who is visiting Washington, USA to attend the G20 Finance Ministers and Central Bank Governors Meeting, is taking a commemorative photo with Kristalina Georgieva, Managing Director of the International Monetary Fund (IMF), before their meeting at the IMF headquarters on October 12 (local time). 2021.10.13 [Image source=Yonhap News]

[Washington D.C. (USA) = Asia Economy Reporter Son Sunhee] Hong Nam-ki, Deputy Prime Minister and Minister of Economy and Finance, stated on the 12th (local time) that "We are preparing for a phased return to normal life by increasing the vaccination rate. Monetary policy is gradually normalizing, but fiscal policy will continue to pursue expansionary budgets next year."

On this day, Hong Nam-ki attended the G20 Finance Ministers and Central Bank Governors Meeting and the International Monetary and Financial Committee (IMFC) held in Washington D.C., USA. The Ministry of Economy and Finance announced that he held a series of bilateral meetings with Mauricio Claver-Carone, President of the Inter-American Development Bank (IDB), David Malpass, President of the World Bank (WB), and Kristalina Georgieva, Managing Director of the International Monetary Fund (IMF), and made these remarks.

Based on the World Economic Outlook (WEO) released on the same day, IMF Managing Director Georgieva said, "The global economic recovery will continue this year, but uncertainties are increasing, and the growth gap between countries is likely to be prolonged." She particularly mentioned the need for vaccine distribution and precise policy measures due to increased downside risks from 'supply chain disruptions, COVID-19 spread, and inflation.'

Hong Nam-ki described the IMF's maintenance of South Korea's growth forecast despite the downward revision of the global economic outlook as "encouraging," adding, "We are preparing for a phased return to normal life by increasing the vaccination rate. Monetary policy is gradually normalizing, but fiscal policy will continue to pursue expansionary budgets next year." Earlier, the IMF revised the global economic growth forecast for this year down by 0.1 percentage points from the previous 6.0% to 5.9%, while maintaining South Korea's economic growth rate forecast at 4.3%, unchanged from the previous forecast.

Furthermore, he stated, "We will participate in the Special Drawing Rights (SDR) worth 450 million to expand the resource base for low-income country support funds and support the establishment of a recovery and sustainability fund within the IMF."

Hong Nam-ki also pointed out the limitations of traditional macroeconomic policies due to the expansion of new cross-border payment methods such as 'cross-border capital flows and virtual assets,' and requested tailored policy recommendations suitable for each country's circumstances.

He emphasized that proactive macroprudential measures need to be reflected in the IMF's official review of capital flows scheduled for early next year. Managing Director Georgieva also stated that the IV will be reviewed through the experiences and participation of each country.

Through meetings with the heads of these three major international financial institutions, Hong Nam-ki discussed ways to strengthen cooperation and mutual interests related to development cooperation projects and support for developing and low-income countries affected by COVID-19.

First, in the meeting with IDB President Claver-Carone, Hong Nam-ki expressed the Korean government's intention to actively cooperate in trust funds, Economic Development Cooperation Fund (EDCF)-IDB co-financing, and Knowledge Sharing Programs (KSP). He said, "The letter of intent to contribute to the Fiscal Innovation Cooperation Fund will be a foothold for Korea-IDB relations," and requested President Claver-Carone's interest and support.

President Claver-Carone requested support for Korean companies' investments in Latin America and the Caribbean and said that he plans to discuss an increase in IDB capital at next year's annual meeting, hoping for Korea's expanded participation in shares (currently 0.004%). Hong Nam-ki expressed active support and indicated Korea's intention to increase its stake in the IDB.

In the meeting with World Bank President Malpass, they reached a consensus on the importance of "mobilizing private resources" to address the funding gap needed for future support to developing countries. President Malpass also requested Korea's participation in replenishing IDA-20 funds, which will be finalized in December, to which Hong Nam-ki responded that he would consider it comprehensively.

Hong Nam-ki mentioned the World Bank's contributions to developing countries' economic recovery and transition to digital and green economies, introducing Korea's efforts such as the "Green New Deal" and "Carbon Neutrality 2050."

This content was produced with the assistance of AI translation services.