It has been pointed out that Korea’s foreign exchange reserves have increased a lot since the IMF bailout in 1997 but are still insufficient to deal with a financial crisis.
According to the Korea Economic Research Institute’s report released on January 11, Korea was in need of US$443.3 billion as of the end of 2014 in accordance with the BIS standards to be capable of coping with an emergency situation but its actual forex reserves stood at US$363.6 billion. The institute added that China, Brazil and Thailand had more forex reserves than required at the end of 2014.
“Korea’s sovereign credit rating was adjusted upward in recent days but this does not guarantee any safety in the event of a financial crisis in that international credit rating agencies had overestimated Korea’s credit rating during the financial crisis in the late 1990s,” it explained.
“The current situation is much worse and recovery from another crisis is likely to be much more difficult due to the recent interest rate hike by the Fed, the accelerating slowdown of the Chinese economy, the continuation of the weak yen and many other adverse external conditions,” the institute added.