Christine Lagarde, managing director of the International Monetary Fund, on Monday expressed optimism on South Korea’s economy for the upcoming years, despite external challenges including the North Korean military provocations.

While assenting to President Moon Jae-in’s economic drive for inclusive growth, the IMF chief also raised some concerns that the nation’s structural reform should take guard against overpacing.

“(The IMF) has a good and strong impression on the Korean economy, which has been performing well in spite of difficult circumstances. This fiscal space could be put to good use,” Lagarde said in a press conference during her seven-day visit to Seoul.

The international organization predicted a 3 percent growth for Asia’s fourth-largest economy this year and the same figure for next year as well.

The IMF chief sat with President Moon and Deputy Prime Minister for economic affairs Kim Dong-yeon in the morning to share views on the economic prospects of South Korea and of the Asian region.

As for the president’s idea of achieving an income-led growth, Lagarde viewed it as a plausible way to reduce a social and economic gap and eventually to boost growth, though she added some precautions.

By combining a fair legal frame for part-time workers and secondary earners, South Korea will be able to increase its growth rate by up to 8 percent in medium term, Lagarde claimed.

“(But) as former finance minister, I believe that such structural reform need to be balanced in pace of the economy, meaning that changes should be measured so as not to exclude people of low skills,” she said.

The monetary chief official also complimented the South Korean economy for its successful recovery from the financial crisis in the late 1990s which had called for IMF bailout, focusing on a wider labor market access for women and young people.

“In addition, private corporations regardless of size should also recognize the fact that they would be financially better off, should they encourage women in society,” the female official claimed.

Other points of concern she raised on the Korean economy included the demographic shift to an aged society, which has been dragging down productivity.

“Talks of war (on the Korean Peninsula) are hurting the economy and the people,” she said, citing stability and prosperity as the top two values of the IMF.

But while the escalation of geopolitical tension is certainly an economic downside, the ongoing efforts to resolve the situation should be considered an upside in the long term, she added.

By Bae Hyun-jung (tellme@heraldcorp.com)