Korea faces inflation risk: Fitch economist

A senior economist of Fitch Ratings raised concerns Tuesday that Korea may face the risk of price inflation as the country is recovering fast through stimulus measures.

Brian Coulton, head of the company’s global economics, said accommodative measures taken by emerging economies could be over-stimulating the market.

“Emerging markets, for the past year or two, introduced aggressive stimulus measures. But outside Russia and Eastern Europe, the financial crisis was less severe and concerns for inflation could emerge,” Coulton told reporters.

“If you have that aggressive monetary policy easing when your economy doesn’t slow so much, then obviously the risk turns in the other direction.”

Brian Coulton

Fitch’s sovereign rating of Korea currently stands at A plus, its fifth highest investment grade. The rating is a level below the AA minus it gave just before the 1997-98 Asian financial crisis. 

Fitch will send a delegation to Seoul next week for an annual meeting with the country’s policymakers, the Finance Ministry said. 

Analyst James McCormack is expected to have talks with officials from the Finance Ministry, Foreign Affairs Ministry and the Bank of Korea next Tuesday.

Chang Hea-kyu, director of the company’s Korean arm overseeing banks, said the recent tightening of foreign banks’ usage of currency derivatives is likely to bring minimal benefit to the market.