Journal Issue
Share
Article

Republic of Korea: Staff Report for the 2017 Article IV Consultation—Informational Annex

Author(s):
International Monetary Fund. Asia and Pacific Dept
Published Date:
February 2018
Share
  • ShareShare
Show Summary Details

Fund Relations

(As of November 30, 2017)

Membership Status: Joined August 26, 1955; Article VIII

General Resources Account

SDR MillionPercent Quota
Quota8,582.70100.00
Fund holdings of currency (exchange rate)7,860.2191.58
Reserve tranche position722.498.42
Lending to the Fund
New arrangements to borrow409.50

SDR Department

SDR MillionPercent Allocation
Net cumulative allocation2,404.45100.00
Holdings2,313.9996.24

Outstanding Purchases and Loans

None

Financial Arrangements (In SDR Million)

TypeDate of ArrangementExpiration DateAmount ApprovedAmount Drawn
Stand-byDec. 04, 1997Dec. 03, 200015,500.0014,412.50
Of which SRFDec. 18, 1997Dec. 17, 19989,950.009,950.00
Stand-byJul. 12, 1985Mar. 10, 1987280.00160.00
Stand-byJul. 08, 1983Mar. 31, 1985575.78575.78
Projected Obligations to Fund1(SDR Million; based on existing use of resources and present holdings of SDRs)
20172018201920202021
Principal0.00.00.00.00.0
Charges/interest0.00.720.730.730.73
Total0.00.720.730.730.73

When a number has overdue financial obligations outstanding for more than three months, the amount of arrears will be shown in this section.

When a number has overdue financial obligations outstanding for more than three months, the amount of arrears will be shown in this section.

Exchange Rate Arrangement:

Korea’s exchange rate system is classified as “free floating” de jure. It has been classified de facto as “floating” since 2009. Over 1997–2008, the exchange rate was classified as “free floating” (“independently floating” under the older classification system). Korea maintains exchange restrictions for security reasons, in accordance with UN Security Council Resolutions, which have been notified to the Fund under the procedures set forth in Executive Board Decision 144 (52/51).

FSAP and ROSC Participation:

An FSAP update, requested by the authorities, was conducted in April and July 2013. The missions included an assessment of various financial sector standards; the soundness of the financial sector, including vulnerability to macroeconomic shocks; and the crisis preparedness and management framework of Korea. The Financial System Stability Assessment (FSSA) report for the 2013 assessment has been published (Country Report No. 14/126) and is available on the web at: http://www.imf.org/external/pubs/cat/longres.aspx?sk=41569.0

FAD: Discussions on fiscal transparency were held in Seoul during June 2000, and a report was drafted and finalized in November 2000, with input from APD staff. The report has been published and is available on the web through the following link: http://www.imf.org/external/np/rosc/kor/fiscal.htm.

STA: Discussions on Korea’s data dissemination practices against the IMF’s Special Data Dissemination Standard (SDDS) were held in Seoul during December 2009, and a Report on the Observance of Standards and Codes (ROSC) was drafted and finalized in July 2010. The report has been published and is available on the web through the link: http://www.imf.org/external/pubs/ft/scr/2010/cr10229.pdf

Technical Assistance:

FAD: A technical assistance mission on government finance statistics took place in Seoul during the period November 8–19, 2010. A mission visited Seoul during August 31-September 16, 2005 to provide technical assistance on the reform of tax policy and administration. A technical assistance mission visited Seoul during January 8–19, 2001 to evaluate current practices in budgeting and public expenditure management and to provide advice on setting up a medium-term fiscal framework.

MCM: Technical assistance missions visited Seoul to provide advice on financial holding company supervision and derivatives regulation during December 8–17, 2008, on measures to deepen the money market during December 4–14, 2007, on strengthening the debt management function and further development of the government securities market during September 20–October 2, 2006, on the reform and development of the foreign exchange market during March 30–April 13, 2006, and on macroprudential and derivatives supervision during October 27–November 7, 2005.

STA: Technical assistance missions visited Seoul during March 29–April 12, 2000 to provide advice on balance of payments and external debt statistics, with a view toward improving the recording of financial derivatives and developing an international investment position statement, and during November 28–December 11, 2007 on the GFSM 2001 framework. Two missions to support reforms related to government finance statistics visited Korea during November 28–December 11, 2007 and November 8–19, 2010, respectively.

Resident Representative:

The resident representative office in Seoul was opened in March 1998 and was closed in September 2008.

Statistical Issues

As of December 11, 2017

I. Assessment of Data Adequacy for Surveillance
General: Data provision is adequate for surveillance.
National Accounts: The overall structure of the national accounts follows the recommendations of the 2008 System of National Accounts. Chain-linked (reference year 2010) and nominal GDP estimates are compiled using the production and expenditure approaches; nominal GDP estimates are also compiled using the income approach. The estimation method for expenditure components, which had used the commodity flow method before the revision to reference year 2005, adopted the direct estimation method, in which each expenditure component is measured directly. The size of the informal sector has not been measured.
Consumer Price Index: The Consumer Price Index (CPI) covers 92.9 percent of total households of Korea; it excludes farming and fishing households. The geographical coverage, which includes 37 urban areas, should be extended to rural areas. The consumption basket is updated every five years with a plan to move to a three-year update cycle; currently, expenditure weights are derived from the 2010 Household Income and Expenditure Survey. The new CPI index adopts both geometric means and the ratio of arithmetic means. The geometrics means should be used for all unweighted aggregation. The missing prices of products, except for the seasonal items, are imputed by the price movements of similar products of the same item in the same geographic area. However, the CPI could be improved further by imputing missing prices of the seasonal items rather than carrying forward the last reported prices.
Producer Price Index: The Producer Price Index (PPI) covers all domestic industrial activities and a large segment of service activity. It excludes exported products, however, because the Export Price Indexes are compiled separately in Korea. The rebased PPI (2010 = 100) employs 2008 SNA concepts and definitions for the record and valuation of the prices and weights. The PPI could be improved by making more use of imputing missing prices using the prices of similar commodities, rather than carrying forward the last reported price. Mostly, the simple geometric average and the weighted geometric average are employed in the elementary level index compilation. But in some, the indices are computed by the weighted arithmetic average. Nevertheless, the headline PPI should be changed to the one based on a geometric mean at the elementary level. The PPI classification by activity conforms to the KSIC, which is itself based on the International Standard Industrial Classification (ISIC)—with slight modifications only to reflect local considerations. The Korean commodity classification used for the PPI does not conform to the Central Product Classification (CPC) and one based on the CPC should be adopted as soon as possible.
Government Finance Statistics: Two sets of government finance statistics (GFS) are compiled for the central government, one using national definitions and the other using internationally recognized standards based on GFSM 2001. The Korean authorities resumed reporting consolidated GFS data on the general government for publication in the 2015 Government Finance Statistics Yearbook (GFSY) which include general government operations and a full balance sheet. The general government data are compiled with significant lags (the latest available data are for 2015), mainly due to the lack in timely source data for the local governments. While high frequency data for central government operations are disseminated under the SDDS, these data are not yet reported for inclusion in the International Financial Statistics (IFS).
Financial Sector Data: Monetary and financial statistics (MFS) compiled by the Bank of Korea (BOK) broadly follow the IMF’s Monetary and Financial Statistical Manual. Both liabilities and assets in foreign currencies are converted into Korean Won at the previous business day’s trading volume weighted average rate prevailing on the balance sheet date. The data are revalued monthly with the exception of monetary gold, which is revalued on a semi-annual basis. The BOK reports monetary data for the central bank and other depository corporations using the standardized report forms (SRFs) The BOK does not report data for other financial corporations.

Korea regularly reported Financial Soundness Indicators (FSIs) to the IMF for dissemination on its website. Quarterly FSI data and metadata are available to the public through the IMF’s website at: http://fsi/FSIHome.aspx#Country. Dissemination of the 2015-16 data has been delayed due to concerns about the quality of the data reported. A set of data revisions intended to correct the discrepancies has been received for 2015, and 2016 data are expected to be provided shortly. Going forward, the Korean authorities should shift to more timely provision of quarterly FSI data to the Fund with a time lag in line with the average in advanced G20 economies of no more than 4 months.
External Sector Statistics: The BOK currently compiles the BOP and IIP statistics consistent with the Balance of Payment and International Investment Position Manual, sixth Edition (BPM6) analytical framework (see http://ecos.bok.or.kr/). The BOK adopted the BPM6 in March 2014.

The quality of the quarterly external debt statistics, including periodicity and timeliness, have been improving since 2006. In early 2007, the BOK switched from annual to quarterly reporting of the International Investment Position. Data dissemination on international reserves and foreign currency liquidity meets the SDDS specifications. Since April 2006, the authorities have disseminated foreign reserves data on a monthly basis rather than twice a month, as had been done since 1997. However, some BOP and IIP data lack consistency.

Korea reports balance of payments and IIP data for the IFS (quarterly data) and the Balance of Payments Statistics Yearbook (annual data) publications.
II. Data Standards and Quality
Korea has subscribed to the Fund’s Special Data Dissemination Standard (SDDS) since September 1996, and it uses SDDS flexibility options for the timeliness of general government operations, central government operations, and analytical accounts of the banking sector data. Korea is also availing itself of a relevant flexibility option for the coverage of exchange rates.A Data ROSC reassessment was published in July 2010.
Korea—Table of Common Indicators Required for Surveillance(As of December 12, 2017)
Date of Latest ObservationDate ReceivedFrequency of Data7Frequency of Reporting7Frequency of Publication7Memo Items:
Data Quality – Methodologic al Soundness8Data Quality – Accuracy and Reliability9
Exchange Rates12/11/201612/11/2016DDD
International Reserve Assets and Reserve Liabilities of the Monetary Authorities1. Oct. 2017Nov. 2017MMM
Reserve/Base MoneySep. 2017Dec. 2017MMMO, O, O, LOO, O, O, O, O
Broad MoneyOct. 2017Dec. 2017MMM
Central Bank Balance SheetOct. 2017Dec. 2017MMM
Consolidated Balance Sheet of the Banking SystemOct. 2017Dec. 2017MMM
Interest Rates212/11/201712/11/2017DDD
Consumer Price IndexNov. 2017Dec. 2017MMMO, O, O, OO, O, LO, O, O
Revenue, Expenditure, Balance and Composition of Financing3 – General Government4NANANANANAO, O, O, OO, O, N/A, O, NA
Revenue, Expenditure, Balance and Composition of Financing3— Central GovernmentOct. 2017Dec. 2017MMM
Stocks of Central Government and Central Government-Guaranteed Debt5Oct. 2017Dec. 2017MMM
External Current Account BalanceQ3/2017Dec. 2017MMMO, LO, LO, LOO, O, O, O, O
Exports and Imports of Goods and ServicesOct. 2017Dec. 2017MMM
GDP/GNPQ3 2017Nov. 2017QQQO, O, O, OO, O, LO, O, LO
Gross External DebtOct. 2017Dec. 2017QQQ
International Investment Position6Q3 2017Nov. 2017QQQ

Any reserve assets that are pledged or otherwise encumbered should be specified separately. Also, data should comprise short-term liabilities linked to a foreign currency but settled by other means as well as the notional values of financial derivatives to pay and to receive foreign currency, including those linked to a foreign currency but settled by other means.

Both market-based and officially determined, including discount rates, money market rates, rates on treasury bills, notes and bonds.

Foreign, domestic bank, and domestic nonbank financing.

The general government consists of the central government (budgetary funds, extra budgetary funds, and social security funds) and state and local governments.

Including currency and maturity composition.

Includes external gross financial assets and liability positions vis-à-vis nonresidents.

Daily (D); weekly (W); monthly (M); quarterly (Q); annually (A); irregular (I); and not available (NA).

Reflects the assessment provided in the data ROSC or the Substantive Update (published in July 2010, and based on the findings of the mission that took place during December 09–22, 2009) for the dataset corresponding to the variable in each row. The assessment indicates whether international standards concerning concepts and definitions, scope, classification/sectorization, and basis for recording are fully observed (O); largely observed (LO); largely not observed (LNO); not observed (NO); and not available (NA).

Same as footnote 8, except referring to international standards concerning source data, statistical techniques, assessment and validation of source data, and revision studies.

Any reserve assets that are pledged or otherwise encumbered should be specified separately. Also, data should comprise short-term liabilities linked to a foreign currency but settled by other means as well as the notional values of financial derivatives to pay and to receive foreign currency, including those linked to a foreign currency but settled by other means.

Both market-based and officially determined, including discount rates, money market rates, rates on treasury bills, notes and bonds.

Foreign, domestic bank, and domestic nonbank financing.

The general government consists of the central government (budgetary funds, extra budgetary funds, and social security funds) and state and local governments.

Including currency and maturity composition.

Includes external gross financial assets and liability positions vis-à-vis nonresidents.

Daily (D); weekly (W); monthly (M); quarterly (Q); annually (A); irregular (I); and not available (NA).

Reflects the assessment provided in the data ROSC or the Substantive Update (published in July 2010, and based on the findings of the mission that took place during December 09–22, 2009) for the dataset corresponding to the variable in each row. The assessment indicates whether international standards concerning concepts and definitions, scope, classification/sectorization, and basis for recording are fully observed (O); largely observed (LO); largely not observed (LNO); not observed (NO); and not available (NA).

Same as footnote 8, except referring to international standards concerning source data, statistical techniques, assessment and validation of source data, and revision studies.

Other Resources Citing This Publication