Tax surplus to reduce government bond issuance, bolster fiscal capacity

MOUs with EBRD, CABEI to establish AI cooperation hubs

Economic cooperation discussed with US, Switzerland, Saudi Arabia, Poland

The world's three major credit rating agencies said the boom in South Korea's semiconductor and AI industries is offsetting concerns about slowing economic growth stemming from domestic and external uncertainties, including an aging population and the war in the Middle East. They also assessed that South Korea's growth, fiscal soundness and external indicators remain on solid footing, reaffirming that the country's sovereign credit rating remains stable.

Deputy Prime Minister and Minister of Economy and Finance Lee Hyung-il meets with Roberto Sifon-Arevalo, S&P Global Ratings' head of sovereign ratings, at the Queen Sirikit National Convention Center in Bangkok, Thailand, on Friday (local time), on the sidelines of the IMF-World Bank Annual Meetings and the G20 and G7 finance ministers and central bank governors meetings. [Ministry of Economy and Finance]
Deputy Prime Minister and Minister of Economy and Finance Lee Hyung-il meets with Roberto Sifon-Arevalo, S&P Global Ratings' head of sovereign ratings, at the Queen Sirikit National Convention Center in Bangkok, Thailand, on Friday (local time), on the sidelines of the IMF-World Bank Annual Meetings and the G20 and G7 finance ministers and central bank governors meetings. [Ministry of Economy and Finance]

Deputy Prime Minister and Minister of Economy and Finance Lee Hyung-il held a series of meetings Friday (local time) in Bangkok, Thailand, on the sidelines of the IMF-World Bank Annual Meetings, with the heads of the three major global credit rating agencies — Moody's, Fitch and S&P — to discuss these assessments, the Ministry of Economy and Finance said Sunday.

In the meetings, Lee said South Korea's economy is expected to grow around 3 percent this year, driven by a boom in semiconductor exports and rising capital investment. He also projected that medium- to long-term growth momentum would strengthen, outlining plans to build future growth engines through three mega-projects, seven seed industry initiatives and the Korea Green Transformation program.

Lee identified reducing polarization as a key task for sustainable growth. He said the government is pursuing three core social policies covering residential support, employment and financial services for low-income households, while also focusing on easing disparities across business, generational, asset, income and regional lines. He particularly stressed the importance of youth employment and introduced related initiatives, including the K-New Deal Academy program.

The rating agencies showed strong interest in the government's fiscal policy and its plans for using additional tax revenue, including through a future response fund, the ministry said. Lee said the government intends to accumulate large reserves through the fund to respond to future changes in economic conditions. He also said the government is working to stabilize the government bond market by using this year's tax surplus to reduce the volume of bond issuance.

Deputy Prime Minister and Minister of Economy and Finance Lee Hyung-il shakes hands with Euroclear Group CEO Valérie Urbain for a photo before their meeting at the Queen Sirikit National Convention Center in Bangkok, Thailand, on Friday (local time), on the sidelines of the IMF-World Bank Annual Meetings and the G20 and G7 finance ministers and central bank governors meetings. [Ministry of Economy and Finance]
Deputy Prime Minister and Minister of Economy and Finance Lee Hyung-il shakes hands with Euroclear Group CEO Valérie Urbain for a photo before their meeting at the Queen Sirikit National Convention Center in Bangkok, Thailand, on Friday (local time), on the sidelines of the IMF-World Bank Annual Meetings and the G20 and G7 finance ministers and central bank governors meetings. [Ministry of Economy and Finance]

Lee also met with Valérie Urbain, CEO of Euroclear, the world's largest international central securities depository.

Lee expressed gratitude to Euroclear for opening an omnibus account at the Korea Securities Depository in June 2024 to support South Korea's inclusion in the World Government Bond Index. Euroclear praised South Korea as a model for capital market openness and advancement. The two sides agreed to cooperate on expanding the use of government bonds as collateral and promoting won-denominated transactions.

Lee also signed MOUs with Odile Renaud-Basso, president of the European Bank for Reconstruction and Development, and Gisela Sanchez, president of the Central American Bank for Economic Integration, to establish AI cooperation hubs in South Korea. The initiative aims to combine South Korea's technological capabilities with the development cooperation expertise of multilateral development banks to support AI transformation in developing countries and advance a global AI hub.

With the EBRD, Lee also discussed expanding cooperation in energy and nuclear power in addition to identifying AI collaboration projects. Renaud-Basso expressed strong interest in South Korea's small modular reactor technology, citing potential cooperation across various areas including nuclear safety. Lee asked that the technology and experience of South Korean companies be leveraged in the EBRD's energy and nuclear power projects.

With CABEI, Lee signed an MOU to establish an AI and digital transformation center, as well as an agreement to set up a Korea office. The ministry said the office agreement is intended to provide a legal foundation for an already-operating office, and is expected to pave the way for expanded cooperation with Central America.

Lee also stressed the need to increase the placement of qualified South Korean personnel at the three multilateral development banks he met with on the sidelines of the annual meetings — the Asian Development Bank, the EBRD and CABEI.

Bilateral economic cooperation talks also continued. Lee met with US Treasury Deputy Secretary Francis Brook shortly after a 2+2 meeting between the finance and monetary authorities of South Korea and the United States, discussing ways to strengthen economic and financial cooperation between the two countries. Lee said both sides should continue close communication and cooperation between their finance authorities.

With Swiss President Guy Parmelin, Lee discussed ways to expand cooperation in advanced innovation sectors including AI, research and development, and biotech. The Swiss side noted that the Korea-EFTA free trade agreement, which marks its 20th anniversary this year, has served as a stable foundation for the two countries' economic relationship.

With Saudi Arabian Finance Minister Mohammed bin Abdullah Al-Jadaan, Lee discussed areas of mutual interest including energy, defense, infrastructure and sovereign wealth funds. Lee introduced plans to establish a new strategic sovereign wealth fund for investment in strategic industries and overseas supply chain companies, and asked to share the operational experience and expertise of Saudi Arabia's Public Investment Fund.

With Polish Finance Minister Andrzej Domanski, Lee discussed expanding defense cooperation and avenues for collaboration at the G20 level. Lee stressed that South Korea and Poland have maintained large-scale defense cooperation and proposed broadening the scope of that partnership further.


y2k@heraldcorp.com