An IMF delegation led by Joshua Felman, assistant director at the Asia-Pacific department, announced the results of regular discussions with Korea’s Ministry of Finance and Economy. The delegation advised the Korean government to appropriate an additional budget in the second half of the year, resolve household debt, stimulate small and medium-sized enterprises and enhance flexibility in the labor market.

It also said Korea needs to lower interest rates further if the recovery is delayed. Felman said there was room for Korea to maintain its low-interest rate policy for the time being. If the economy doesn’t get back into full swing, Seoul could even cut interest rates further, he added.

He said since there was heavy government spending in the first half of the year, cutting it in the second half might hurt the fragile recovery. As for what an “appropriate” level might be, he said this meant roughly the same extra budget allocated in 2002 and 2003. The IMF said the extra money should first be spent on unemployment benefit and building the social safety net.

But Felman attempted to calm fears that lower interest rates could lead to a jump in property prices. He said recently increased real estate prices in Seoul were still 6 percent lower than in 2003, and there was no property bubble.

Felman said he would not change his prediction of a 4 percent growth rate this year since he was certain Korea was on track for a recovery.

(engishnews@chosun.com )