Transcript

Transcript of April 2019 Asia and Pacific Department Press Briefing

April 12, 2019

Moderator:

Ting Yan, Communications Officer, Communications Department

Panelists:

Changyong Rhee, Director, Asia and Pacific Department

Odd Per Brekk, Deputy Director, Asia and Pacific Department

Anne-Marie Gulde-Wolf, Deputy Director, Asia and Pacific Department

Kenneth Kang, Deputy Director, Asia and Pacific Department

Jonathan Ostry, Deputy Director, Asia and Pacific Department

MS. YAN: Good morning, everyone. Welcome to this press briefing on the Asia and Pacific Region, and thank you for being with us here today, early in the morning, and also welcome to those who are watching us online. My name is Ting Yan. I’m with the Communications Department. Let me introduce our speakers today.

Sitting in the middle is Mr. Changyong Rhee, Director of the Asia and Pacific Department, and we also have four Deputy Directors here. On Changyong’s left, we have Mr. Ken Kang and Mr. Jonathan Ostry. On Changong’s right, we have Ms. Anne-Marie Gulde-Wolf and Mr. Odd Per Brekk.

Changyong will have some opening remarks, and then we will be happy to take your questions after that. With that, let me give the floor to Changyong.

MR. RHEE: Thank you, Ting. Good morning. We are very pleased to share with you our views on the economic outlook for the Asia Pacific Region. Let me start by summarizing our main message.

First, despite the faster than expected slowdown of global economy, the outlook for Asia Pacific Region remains relatively stable. The Region continues to account for more than 60% of the global gross, but downside risk have increased, including faster than expected deceleration in global growth and trade, the possibility of the new trade tension, higher oil prices, and global financial market volatility.

Therefore, it is still too early to say that spring has come in the Region. Policies and reform should seek to maintain the current expansion while ensuring sustainability and increasing resilience. Let me expand on this point, starting with the economy outlook for the Asia Pacific.

As Managing Director Lagarde said, at her press conference yesterday, the world economy has been slowing more quickly than expected. However, economies in Asia has remained resilient, due to three contributing factors, compared with the situation in last October. Opposed in interest rate normalization in major advanced economies, the U.S.-China Trade Truce, and the lower commodities prices contribute to the -- in stabilizing Asian economy. In addition, several countries have eased their policy stance in these plans to global growth slowdown.

Considering these factors, we project Asia to grow by 5.4% both in 2019 and 2020, largely unchanged from our projection from last October. In China, you may find surprising that we revise up our -- the 2019 growth projection to 6.3% from 6.2% in October, mainly due to the change in our assumption that the U.S. tariff rate of 10% on 200 billion packages will not rise to 25%, which was assumed in last October, that the rate would increase from March, but due to the, you know, Tariff Truce, the tariff increase, we are assuming no longer will increase, and, also, the larger than expected fiscal policies plans from Chinese Authorities will also -- have offset the impact of weaker external demand. As a result, we revised our China’s growth by 0.1%.

In Japan, the economy’s projected to expand by one percent in 2019. This refracts additional fiscal support this year, including measures to mitigate the impact of planned consumption tax increase in October 2019. In fact, Japan is the only G7 country where a growth rate in 2019 is expected to be higher than in 2018.

In India, growth is expected to pick up to 7.3% this fiscal year, amid more expansionary policy stance, and India remains global leader of fastest growing large economy. We keep the growth forecast for Korea at 2.6% this year, despite weaker investment and export, as we factor in substantial stimulus from the supplementary budget, which was announced by the government.

In Australia and New Zealand, growth in 2019 is projected to slow to 2.1% and 2.4%, respectively, affecting weakening domestic demand, continue the cooling of the housing market, and the weaker global economy outlook.

In ASEAN, growth is projected to remain broadly stable at around five percent in the next two years, despite less favorable external demand environment. Thank -- because of the more domestic factors contributing to the resilience in the Asian economy.

Growth in Pacific Island countries and other small states is expected to recover after several natural disaster last year, with a significant variation among countries. So, now, let’s move to the -- to discuss risks in the Region.

Overall, risks are –tilted decidedly to the downside. First, we are watching closely the deceleration in global growth and trade, and if the trade deceleration turned out to be more pronounced, and long lasting, that it will clearly affect growth in Asia Pacific Region.

Second, trade policy uncertainties could pose a renewed threat to growth. A trade deal between the U.S. and China is still quite uncertain and if the agreement is reached, that will definitely be beneficial as lower tariff reduce uncertainty and structurally forming China with the support, global growth.

Financial markets have already responded positively to this possibility, such that any setbacks in the negotiation could constitute downside market risk. In case of agreement involving “managed trade”, where China commit to import more from U.S., by reducing import from elsewhere, can be an issue. There could be a negative impact on other countries, whose export to China would be crowded out by U.S. export. Likewise, if the deal involved preferential access for the U.S. to Chinese market, this could lead to broader worries about the future of the multilateral trading system.

Third, global financial conditions could tighten if downside risk materialized and financial market entered a generalized risk-off episode. Tighter financial condition would definitely affect this proportionately, countries with higher private or public sector financial leverage. So, given this outlook, let me conclude by discussing our major policy recommendation.

As I explained, we see several headwinds emerging from unfolding slowdown in global growth and trade, which will keep conjuncture quite challenging. By contrast, there are tailwind also, from the pause in advanced economies' monetary policy normalization, lower commodity price, even though the oil price start to increase again, and some policies stimulus in the region. In addition, cross-winds from trade tensions are continuing, adding the currently heightened uncertainties. Therefore, agility, vigilance, and prudence will be necessary to navigate through this swirling winds. Macroeconomic policies should aim at stabilizing growth, while ensuring sustainability and increasing resilience.

In parallel, financial policies should aim to address vulnerabilities from high leverage, and build up offers. As many Asian economies have policy space, if downside risk materialized, Asian policymakers need to adjust their policies, depending on countries’ specific circumstances.

Asia also need to focus on policies to sustain its growth momentum over the medium tongue, in the face of declining productivity growth, and the rapid aging. Labor and product market reforms, as well as for the market opening, should continue with a view to boosting employment, firm dynamism and innovation, while at the same time, stressing social spending to address rising inequality and inclusion gaps. So, that summarized our economy outlook and policy recommendation. Thank you.

MS. YAN: Thank you, Changyong. Now, we can take your questions. Please identify yourself with your name and media organization, and we will take a few questions together.

QUESTIONER: Thank you, panelists.

My question is, what substance do you hope to see, or would you recommend to be included in a potential U.S. China trade deal, so that it will most likely benefit the Asia Pacific region?

And secondly, if you can comment on China’s stimulus measures and how it ties in with China’s long-term objective of restructuring its economy? Thank you.

QUESTIONER: I have two questions. Firstly, you mentioned about trade deceleration and some of the trade policy uncertainty. I was wondering whether a potential regional comprehensive economic partnership agreement would somewhat offset that kind of trade uncertainty? And why do you think such an agreement could be for regional economic growth?

Secondly, I want to ask about Belt and Road Forum for International Cooperation later this month. What’s your expectation for the forum, and what does the IMF want to bring and maybe bring out of the meeting? Any kind of agreement or potential corporation under that frame? Thank you.

QUESTIONER: Could you comment on any fiscal slippage that Sri Lanka might have given this is an election year?

The other question is, how important is labor reforms given the ageing population in Sri Lanka?

MR. RHEE:

Okay, I’ll address this trade talk in a general way, and then I will ask Ken to address China’s stimulus and Anne-Marie to Sri Lanka issues.

First of all, let’s move back to what happened last year in terms of the trade tension. What is its impact on Asia overall last year.

Surprisingly, you know, impact of trade tensions, which escalated last year, didn’t affect Asia’s trade flow very much until October. I mean the real economy. Partly, because of frontloading by expecting the higher tariff, probably China maybe export in advance before the tariff increase. But also, there is some trade diversion of a higher tariff on China’s export goods makes some countries can benefit by, you know. For example, Bangladesh textile industry now can compete better with the Chinese and U.S. market. That kind of things.

So, with trade diversion and some frontloading, and actually, Asia, including China’s trade hold up quite robustly until November, you know, until third quarter of last year. But we actually have some concern from last quarter of last year, and especially, first quarter of this year. The Asia’s including China’s trade shows some sharp decline. Okay?

So, our general view is that trade tension actually has a negative impact on Asia mostly last year through the financial market, stock market decline, and confidence actually decline, investment decline, rather than trade flow directly. But as trade tension escalates more, now we are starting to see that the trade flow may be affected.

But from January on, there is a market sentiment that some agreement will be reached by June or whenever. So, the market actually so far took it quite positively.

So, what we are worrying about is two things. If there is no agreement reached contrary to the market expectation, market can react quite negatively because they already factored in some agreement to be reached.

And then if the tariff, you know, is really increased then the trade volume can significantly go down. That’s why we worry about -- that’s the scenario that we worry about.

So, to the question, what are you expecting for the agreement in detail? We have to wait. We don’t know the answers. But as we mentioned, a few things are important. I think that probably the confirmation that the tariff will not increase or even better to reduced. Okay?

And then that this agreement be not a short-term agreement, then it gives us some kind of confidence to market. It can be a more fundamental agreement between the China and the U.S. and others. Basically, that means that the structural issues that have been discussed such as fair trade the intellectual property and the structural side or more market opening. Those things have to be an important element that otherwise, you know, this agreement may be short lived. So, a kind of longer-lasting agreement will be very important.

And so, you know, we have to wait. But also, the last point, as I mentioned, the agreement should be consistent with multilateralism rather than bilateral, you know, agreement between U.S. and China. Okay? That’s our view on the trade. And Ken, you want to answer the stimulus?

MR. KANG: On your question about Chinese stimulus and structuring. As Changyong mentioned, the modest slowdown in growth in China is broadly in line with our expectations, reflecting mainly the authority’s efforts to rein in excessive credit growth but also, the escalation of trade tensions. The authorities have responded appropriately to the spillovers from the trade tensions by easing policies.

On fiscal policy, I think we support the focus of the budget on boosting consumption by reducing the high levels of Social Security contribution rates and by reducing the dispersion of VAT, which will help to boost consumption and jobs. At the same time, there is a need though to look for ways to make the tax system more progressive as well as to boost spending on pension, education, and health.

On monetary policy, our view is that the degree of monetary accommodation is sufficient. The PPC cut the Reserve requirement rate several times last year. And as a result, the interest rates have declined. But given that we have fiscal stimulus underway and given that inflation pressures remain low, we feel that monetary policy is at the appropriate stance and should focus on its main task of containing inflation pressures.

On your question about restructuring, I think in our view, the overarching policy imperative remains to switch to achieving high-quality growth from high-speed growth. And basically, that means to accelerate efforts to rebalance the economy by boosting consumption. But also, look for ways to open up the economy further through further reforms of investment and trade.

MS. GULDE-WOLF: Yeah, let me come to your question on Sri Lanka and the context of the forthcoming elections. In that context, we really need to emphasize three messages. I mean we need to make sure that the authorities should continue to pursue prudent policy mix in the runup with sustained revenue-based fiscal consolidation and adequate vigilant monetary policy and continuing efforts to build reserves.

It is critical in this context that market confidence is being maintained, and the economy’s resilience to shocks, which has been strengthened over the past couple of months continues to be strengthened. As you know, there is high public debt, so market confidence is a critical element. Structural reforms are ongoing. They need to focus on trade opening, SOE reforms, and increasing competitiveness.

And you mentioned the issue of labor. At this point, as you know, unemployment is low, but in the forward-looking policies of competitiveness and looking at an ageing population, labor reforms are essential. One of them that I would stress is to increasing the participation rate of women also, which is very low in Sri Lanka.

MR. KANG: Okay. I’ll take the question on the BRI. I think, you know, we see China’s Belt and Road Initiative as an important one for fostering greater regional economic cooperation, particularly in the areas of trade, investment, and finance. This will give a boost to much needed infrastructure investment and connectivity, which in turn, will support trade and growth.

That being said, the initiative does entail risks, if not managed well. Risks stemming from issues related to fiscal sustainability, limited positive spillovers to recipient countries, and even risks to China, including credit risk.

Therefore, it is important that these projects be implemented well. And this requires ensuring that a focus on open procurement, you know, high standards for governance, a focus on fiscal sustainability, as well as private sector participation.

You know, we at the IMF, have worked closely with the Chinese authorities on sharing best practices, including in the areas of fiscal sustainability. And we stand ready to do more to further our engagement, including through the China-IMF Capacity Development Center, which was just established last year.

QUESTIONER: There is a lot of interest in India's bonds, particularly government bonds among foreign portfolio investors, but it is capped at 6 percent of the total outstanding. Do you think at the same time India wants to be featured in some global index? Do you think that it's time that India should open up more space for that bond for the foreign investors?

Also, one additional question. Do you think it's time that India should consider full convertibility of the currency? Thank you.

QUESTIONER: Good morning. Quick question, perhaps, sort of a general one. In terms of the -- related to the trade negotiations between the United States and China other things are developing such as the new CFIUS rules that are coming into place restricting, potentially, ownership of companies in America to minority owners. There are rules being discussed around exports. It's all part of worrying about the loss of technology and IP out of America. What's the view what this does to global growth and what it does in the region? Does this lower potential growth because it's a sort of headwind?

And, perhaps, to Mr. Ostry I'll throw a question. Does this affect a country like Australia? Are there any concerns that our investors, policymakers should have?

MS. OSTRY: So on the general question I think as Changyong eluded to in his opening remarks our main concern is that whatever deal is reached both about trade and the surrounding opening up policies in China and so forth be done as far as possible on a multilateral basis, respecting the multilateral rules of the system, and that we try and limit as far as possible, sort of, preferential access to some countries to some markets, rather than sort of respecting general multilateral rules.

I think as far as the impact of the U.S. China deal on Australia itself I think the main issue that we worry about is possible trade diversion effects which Changyong eluded to in his opening remarks. Our sense is that we've done some -- you know, obviously, until the details of this deal are known we can't really do more than, sort of, analyze a hypothetical case, and we've done such an exercise in which China agrees to import, say, an additional $50 billion in goods from the U.S. and, sort of, through the trade linkages examined the spillover effects, the possible trade diversion effects as China imports less from other countries.

Our sense is that, sort of, the first round impact of that on Australia would be relatively small if, sort of, there's a proportional reduction in Chinese imports based on initial trade shares across its main trading partners. But that if the deal is -- involves more purchases of goods in commodities that are very high in the China Australia trading relationship then the impact on Australian growth and so forth could be more substantial.

MS. GULDE-WOLF: Let me talk to your question on India and the capital account liberalization. As we have mentioned also before we would support a continued gradual liberalization of India's capital account broadly in line with the plans if the government and the RBI have formulated it. This strategy needs to be well-balanced, looking at financing need, but emerging external vulnerabilities and limiting vulnerabilities that are around, given the very high financing needs of the government.

In the first place, when looking at capital account liberalization we would encourage to look at FDI. This should be a priority, and then gradual opening for portfolio flows afterwards. And I think the question that you had on the full convertibility of the rupee needs to be seen in exactly the same contents. It has to be gradual and it has to be seen against the vulnerabilities that are there. We have, you know, the government has a medium term fiscal strategy that looks at a medium -- limiting debt at 40 percent once you are at debt level and sustainability is achieved. Then that would be the right time to consider the full opening of the capital account.

QUESTIONER: About North Korea. Since North Korea has been building relationship with the U.S. and South Korea it's been a question that if North Korea is joining global financial institutes like IMF or World Bank. And, also, South Korean president stated that Kim Jung is interested in joining those global banks. So my question is, is IMF willing to help North Korea join as a member? If so, what's the mayor requirements, or on the other words, the biggest challenge for North Korea to join those global financial institutes? Also, is there any assistance that IMF can provide, not necessarily financial aid, but something else before even North Korea becomes a member? Thank you.

QUESTIONER: Just a question about China more broadly and the transition from an investment and export orientated economy towards a consumption and service based economy. One of the key issues for Chinese growth going forward we've had some success so far. What are the challenges in the coming years?

QUESTIONER: Most of the south Asian country, including Bangladesh, now currently formulating a mixed monetary policy covering both conventional and unconventional approach to receive the sustainable economic growth through boosting financial inclusion programs. How to see such initiative to minimize such initiative to facilitate the financial success to the finance? Particularly, women of the Bangladesh?

Second, I'm interested to know about the financial sector of Bangladesh. Mainly the banks are now facing the NPL like India, and day by day is the trend increasing, trend continue? What is the recommendation about the issue to minimize or to reduce the volume of -- in here in the banking sector? Thank you.

MR. KANG: So I'll take the question on North Korea first. On North Korea we have not received any communication from North Korean authorities regarding possible engagement, you know, with the IMF. As you know, North Korea is not a member of the IMF, and therefore, we cannot provide financial assistance. More broadly, you know, whether any engagement, whether it's financial or non-financial would very much depend on the views of our major shareholders in the executive board of the IMF.

On the question about China's transition and the policy challenges. As I mentioned earlier, it is our view it's important for the Chinese authorities to stay the course, to continue with efforts to switch to high-quality growth from high-speed growth. And, basically, that entails four broad elements. First, is to continue with deleveraging, you know, through a tightening of regulatory and financial policies.

Second, is to look to expand the role of the private sector through a further opening of trade and investment. Third, as you mentioned, is to boost consumption while slowing the pace of investment. And, lastly, over the longer term look for ways to modernize the policy frameworks, including fiscal, financial monetary, as well as policy communications. It's important to accelerate these efforts to rebalance and to continue with de-risking because this will help make the Chinese economy achieve a more sustainable path of growth as well as reduce vulnerabilities for the benefit of China as well as for the rest of the world.

Ms. GULDE-WOLF: Can I take the question on the banking sector in Bangladesh? You know, you point your finger to an important question. We see a need to address banking sector issues with very urgently. A bank performance in Bangladesh in spite of strong economic performance has not been satisfactory.

We have seen an increase in non-performing loans, both in the state-owned banking sector but there are issues also in the private sector. So the authorities have started taking on efforts to improve supervision regulation. And we will have what we call a Financial Sector Stability Review forthcoming for Bangladesh in which we will discuss with the authorities very concrete steps on what they can do to strengthen the banking sector.

You also made the right questions about financial inclusion. This is an important element in the private sector development and there are issues in Bangladesh even though Bangladesh was a pioneer in microfinance. So looking at those issues will be a big part of this financial sector assessment review that is coming forth, that is going forward.

MS. YAN: Let me take a few questions online. We have two questions from Bloomberg News Indonesia. One is, a few months ago during the meetings in Bali, trade tensions between Federal Reserve's policy normalization path were key risks for emerging markets economies including across Asia. What are the key risks facing Asia at this point and are they now start winding back rate hikes that were made in response to the Fed's tightening?

And the second question, we have seen in recent month's inflation trading down in several economies in southeast Asia. In Indonesia it has fallen below the central bank's target band of 2.5 to 4.5 percent. Is this overwhelmingly a good thing or does it also present risks? If so what are those risks?

We have also got a question from Reuters New Zealand. What is the outlook for New Zealand's economy in the next year given how dependent on trade it is as well as some domestic drivers being quite weak in recent months?

And one more question from Japan, Asahi Shimbun. On Japan's consumption tax. Given the recently released WEO has downgraded Japan's growth and has Japan's projected growth percent of 0.5 percent in 2020. And given the trade risks, is there a scenario where the IMF would not support a rise in the consumption tax?

MR. RHEE: Okay. Let me take the first question about Asia and then ask Odd Per to answer the second and the Japan one and then Jonathan can address the New Zealand one.

As I mentioned that, you know, I think that in Asian countries and also India, actually government authorities did a great job in handling the financial turmoil in last October when the oil price rising and, you know, there is a depreciating pressure in Asia and the Fed's taught to normalize it.

So that risk is much reduced now so as a question asked whether there is a time for them to start to reduce the interest rate and focus more on other policy objectives, my answer is two things.

One, definitely this current environment will allow them more policy space. It's true. They have now compared with last October, they have a more room to use several policy options for enhancing the goals and or some financial stability.

But at the same time as we mentioned, the downside risk is higher now. Still remains for example like, you know, trade tension even though it is a lot less so but still there is lots of uncertainty whether the deal will be reached or not.

And then also that global economies also slowing down. So given these uncertainties, I think there still is important for Asian policy makers a little bit to be -- not to be complacent and still look at the how those things will go and then try to save the ammunition as in general. But definitely if the downside risk materialize, they have a space to react.

MR. BREKK: Thank you. So I will comment on the inflation in Indonesia. First off, low and stable inflation is a good thing. It protects consumer's purchasing power, it facilitates long term planning and it's in that sense it is conducive to sustainable economic growth. It is also good social policy in the sense that poor people tend to be affected more by high and unstable inflation.

Now in Indonesia, the CPI inflation did indeed decline from 3.1 percent at the end of last year to 2.4 percent in March, the latest numbers we have. The main driver behind this was the food prices. And the core inflation is trading food prices and other volatile prices was basically unchanged at around three percent.

Now what does this mean for monetary policy in Indonesia. Those who follow Indonesia may recall that the Bank Indonesia raised interest rates in the several steps by 175 basis points in the course of last year. Many of us faced or more affected by the emerging market sell off than other countries in the region.

Following this, it has kept the interest rate, policy rate on hold. We think that this stance is the appropriate at this point but going forward, we think that Bank Indonesia should monitor the effects of the steps that it has already taken and see how it affects inflation over time and if inflation is coming down, stand ready to loosen monetary policy.

On Japan, on the consumption tax increase, I think the one thing to keep in mind is that it is inevitable that taxes in Japan have to go up over time. This is needed to help manage the debt position, Japan's debt is very high, and also it's important because Japan will be facing increasing spending pressures as a result of the aging population over time.

Relying on increases in the consumption tax to do this is a good way, it's an efficient way. It's equitable. It's less distorted than other taxes. And even at 10 percent which is the planned increase, is the plans to increase the consumption tax rate from 8 to 10 percent in October. Even at 10 percent, the rate is very low by international standards. So that’s the first point.

Now the second point is it is also essential to protect near term reflation and growth while increasing the consumption tax. And with this in mind, we have recommended that Japan keeps an on or introduces offsetting measures to keep fiscal policy impulse unchanged from 2019 to and in 2020.

In late 2018, the government introduced a set of measures to offset the consumption tax increase which means that the stance for this year is neutral. But on current policies in 2020 there will be a fiscal contraction of about half a percent.

Let me maybe comment very briefly also on the longer term. Beyond the short run, a growth friendly fiscal consolidation strategy would be needed in Japan and this has to increase, has to include further increases and gradual increases in the consumption tax and to levels that are about 10 percent.

And then combined with concrete measures to deal with the spending implications of the aging population. Announcing the finding and announcing such a plan now can build fiscal space even in the short run.

Now on the last point, should downside risks materialize, for instance as a result of trade tensions, the authorities will have to look at measures to provide additional support to domestic demand.

In that case we think that fiscal policy should be the first line of defense. And given that monetary policy already is very accommodative and that the monetary policy space is quite limited in the current situation in Japan but a delay in the consumption tax should not be part of the short-term stimulus. Rather, what Japan should pursue is well targeted supplemental spending focused on areas that can boost growth and achieve social objectives. Thank you very much.

MR. OSTRY: So indeed, we do see the outlook for New Zealand to be somewhat weaker this year than it was last year. Like many countries, there are global headwinds and that’s part of the story.

But the more important aspect is that the factors that were boosting growth last year are coming off. These include reconstruction from the earthquake, sizable net immigration, and also sort of tailwinds from the property market. These things are going a little bit into reverse this year.

There are also risks around that outlook both from domestic and external sources. On the domestic side, the property market downturn could be more severe than we currently project. The boost from fiscal policy including infrastructure spending could come on-stream slower than we hope.

And there is also the possibility of course from a global aspect that, you know, risk aversion and global financial conditions tighten and given high household debt in New Zealand that would be an amplification mechanism for domestic demand in New Zealand.

That being said, as for Australia, New Zealand has considerable policy space to manage those risks both through monetary easing and providing further fiscal stimulus.

MS. YAN: Thank you. Let's take one last question.

QUESTIONER: Thank you. And as you mentioned, the Korean government is preparing for the supplementary budget but the size of the budget will be much smaller than IMF suggested.

Would you still -- do you still think that Korean government will exceed the GDP growth 2.6 percent? If so why do you think that? Could you tell me the reason more detailed?

MR. KANG: Yes, okay. Okay, on your question about Korea, I think we are, you know, projecting growth to moderate slightly this year to 2.6 percent and that driven mainly by slowing exports related to the tech cycle as well as a bit sluggish investment related to the maturing of the construction cycle.

But on a positive side, we do expect private consumption to pick up due to the fiscal impulse already in the budget as well as an expected supplementary budget.

You know, we continue to believe that additional stimulus is needed through a supplementary budget and that this stimulus, this spending should focus on ways to improve the social safety net, to improve the functioning of the labor market and to help promote investment.

At the same time, I think the spending can also be quite useful for promoting structural reforms. You know, we take note the need for greater what we call flex security in the labor market, ways to strengthen active labor market policies but also looking at more broadly at the product market. I think further liberalization of the service sector would help and reducing barriers to entry would help promote innovation and investment and employment in Korea.

MS. YAN: Thank you very much. This concludes our press conference.