Lagarde: Very Good Developments Can Occur in S. Korea

International Monetary Fund chief Christine Lagarde expressed optimism Monday about the future of the South Korean economy as she forecast Asia’s fourth-largest economy to grow 3% this year.

The assessment is in line with South Korea’s growth outlook for 2017. In July, South Korea raised its target growth to 3% from 2.6%, citing export-led growth, Yonhap reported.

She said the South Korean economy could also expand 3% growth in 2018. “I believe the Korean economy is extremely resilient and has demonstrated resilience in the face of adversity,” Lagarde said in a news conference in the press center in Seoul.

She made the comments amid heightened tensions on the Korean Peninsula over North Korea’s sixth and most powerful nuclear test earlier this month.

The United Nations Security Council is likely to vote this week on further tightening sanctions on North Korea, a move that has prompted Pyongyang to warn that the US will suffer the “greatest pain” if it pushes ahead with the tougher UN sanctions.

Lagarde—who visited the Demilitarized Zone that separates South and North Korea—said she sees every downside in the escalation of the tensions, and every upside in trying to resolve those tensions and trying to re-establish certainty rather than uncertainty.

“I am confident that the economy will stand and hopeful that the situation will be resolved in a positive way,” Lagarde said.

She also said the South Korean economy has the space to target the medium-term challenges of the financial safety net of the elderly people, and of the women’s contribution to the economy, saying that Seoul can significantly improve on facilitating the access of women and young people to the job market.

South Korea has taken a series of steps in recent years to try to bring stay-at-home moms back to work. About half of South Korean women at work quit their jobs in 2016 due mainly to marriage, pregnancy and childbirth, according to the government. South Korea’s female labor participation is among the lowest in the world, as many women leave work to raise children.

“We believe that by combining integration of women, innovation, having a fair competition playing field, very, very good developments can occur in the Korean economy. So we are overall optimistic about the future of the Korean economy in spite of the external threats that it addresses with your resilience,” Lagarde said.

She also said a hike in the minimum wage could make people spend more and kick-start additional consumption.