Stimulus Planned to Encourage Growth in the South Korean Economic System
Developing markets are ideal locations for international businesses, and South Korea is no different. This Asian nation has witnessed modest economic expansion and other positive fiscal trends over the past year, and a new stimulus package announced by its government could provide a boost to the South Korean economic system.
At the end of July 2014 South Korea outlined a $40 billion plan designed to bolster the country's economy, according to The Wall Street Journal. The nation currently faces high debt levels due to a dependence on credit, as the past 10 years have seen household debt more than double. Some people fear that this package could further increase that already high level of debt.
"We are concerned that the Korean economy could fall into a debt trap," Nomura economist Kwon Young-sun told the media outlet.
However, others, including President Park Geun-hye, believe that this type of action is exactly what is needed to secure the future of the South Korean economic system. In addition to the stimulus, the government announced tax breaks to companies that pay increased wages using cash reserves. This could lead to higher consumer spending, especially in the South Korean housing market.
Overall, the South Korean government's goal is to develop a long-term solution to ensure economic growth, noted the news source.
Economy supported by exports
While overall growth has been modest, there has been a recent uptick in exports and imports in the South Korean economic system, The WSJ reported. In July of this year U.S.-bound exports climbed more than 19 percent year-over-year, while the European Union and Japan saw exports increase 11.5 percent and 6 percent, respectively.
The WSJ also highlighted growing imports to South Korea. Imports rose 5.8 percent year over year in July. That is the fastest pace in more than two years, a sign that consumer demand could be starting to climb. South Koreans are also buying mobile phones and vehicles at an increasing rate.
The improvements in these economic areas are positive, but there is concern that a dependence on exports could be costly as other nations - such as China - begin to match the manufacturing prowess of South Korea.
As South Korea emerges as a desirable market for global businesses, interested companies must understand the risks and prepare accordingly. For organizations operating in high risk areas of the world, learn how specialty commercial insurance can protect your assets.
To access the risks and learn more about safety and security, make sure to visit South Korea risk assessment country guide.