South Korea Second time around

South Korea

Second time around

Oct 23rd 2008 | SEOUL
From The Economist print edition

Shock, denial, anger and a massive bail-out for good measure

OF ALL the Asian countries worst ravaged by the regional financial turmoil of 1997-98, South Korea has come closest in recent weeks to seeing history repeat itself—not as farce, but as renewed financial tragedy. As its stockmarket has slid downhill and the currency, the won, has fallen by nearly 30% this year, the government has been telling all-comers that the economy is sound and the banks liquid and solvent. Its officials have blamed their troubles on the ignorant or malicious refusal of foreign analysts to believe them.

Yet on October 19th the government announced a $130 billion rescue for Asia’s fourth-largest economy. Of this, $100 billion is in the form of guarantees for foreign-currency debts. Another $30 billion—about one-eighth of the country’s foreign-exchange reserves—was to be available to banks suffering a drought of dollars. It followed this up two days later with a promise to spend 12 trillion won ($9.2 billion) to help the building industry—for example by refinancing debts and buying unsold houses. The president, Lee Myung-bak, described the overall economic situations as “more serious” than in 1997, because of the global sweep of the crisis. The government had already appealed to the grass-roots patriotism that helped South Korea through the late 1990s: cutting back on energy bills; buying local products; and surrendering any dollars left over from overseas jaunts.

South Korea

Second time around

Oct 23rd 2008 | SEOUL
From The Economist print edition

Shock, denial, anger and a massive bail-out for good measure

OF ALL the Asian countries worst ravaged by the regional financial turmoil of 1997-98, South Korea has come closest in recent weeks to seeing history repeat itself—not as farce, but as renewed financial tragedy. As its stockmarket has slid downhill and the currency, the won, has fallen by nearly 30% this year, the government has been telling all-comers that the economy is sound and the banks liquid and solvent. Its officials have blamed their troubles on the ignorant or malicious refusal of foreign analysts to believe them.

Yet on October 19th the government announced a $130 billion rescue for Asia’s fourth-largest economy. Of this, $100 billion is in the form of guarantees for foreign-currency debts. Another $30 billion—about one-eighth of the country’s foreign-exchange reserves—was to be available to banks suffering a drought of dollars. It followed this up two days later with a promise to spend 12 trillion won ($9.2 billion) to help the building industry—for example by refinancing debts and buying unsold houses. The president, Lee Myung-bak, described the overall economic situations as “more serious” than in 1997, because of the global sweep of the crisis. The government had already appealed to the grass-roots patriotism that helped South Korea through the late 1990s: cutting back on energy bills; buying local products; and surrendering any dollars left over from overseas jaunts.