Recasts after Shin's statement

By Cynthia Kim and Jihoon Lee

SEOUL, March 22 (Reuters) - South Korean economist Shin Hyun-song, best known for predicting the 2008 Global Financial Crisis, was named on Sunday to head the country's central bank, just as it faces economic pressures resulting from patchy domestic growth and the Iran war.

President Lee Jae Myung chose Shin - currently head of the economic department at the Bank for International Settlements $(BIS)$, dubbed the central bank for the world's central banks - to replace Rhee Chang-yong as Bank of Korea (BOK) governor when his term ends on April 20.

In a statement released by the central bank, Shin said he would seek a "balanced" policy approach with inflation, growth and financial stability under consideration.

"Volatility in financial and foreign exchange markets, as well uncertainty over the economic outlook, heightened recently on rapid changes in the Middle East situation," Shin said.

POLICYMAKERS FACING BALANCING ACT

Shin, who has an academic reputation defined by his consistent warnings against excessive borrowing, faces immediate challenges from Middle East-driven inflation and uneven growth.

"As seen in the recent Middle East situation, domestic and global economic conditions are not separate from each other, which will make his expertise stand out even more," a spokesperson at the presidential Blue House told a briefing.

He takes over the top central bank job at a time when policymakers face a delicate balancing act between supporting growth and containing financial stability risks stemming from surging household debt and the Iran war.

Although high-tech sectors including the semiconductor industry are thriving, recovery remains uneven as traditional sectors such as steel and petrochemicals struggle due to weak external demand.

The BOK in February left its benchmark interest rate KROCRT=ECI unchanged at 2.50%, and signalled it is likely to keep rates steady until at least August this year.

MORE A HAWK THAN A DOVE

Many of Shin's remarks in previous interviews were about the need for major policy efforts to deleverage amid surging household debt, to avoid the kind of financial crisis the country has seen in the past and also to curb red-hot property prices around Seoul.

"He can be seen more as a hawk than a dove, that's a broad understanding among economists largely because many of his papers have been focusing on the dangers of over-leveraging," an official who worked with Shin at the BIS said.

A finance ministry official said: "I don't think anybody in academia will dispute that he is arguably one of the most accomplished economists from South Korea. (He) Has humble character, and my experience when I visited the BIS was all positive as he arranged so many networking events for visiting Korean officials."

Shin, 66, faces a confirmation hearing in the National Assembly, but lawmakers do not have a veto over the president's nomination.

"If it's a supply shock, and certainly if it's a temporary one, these are the textbook examples where you should look through and ​not react with monetary policy," Shin said in a report last week. "It really depends on how long the conflict lasts and ​how long the rise in the oil price will be sustained."

Shin and Indian economist Raghuram Rajan presented warnings at a U.S. Federal Reserve conference in August 2005, drawing a metaphor from the London Millennium Bridge to identify systemic vulnerabilities that would eventually trigger the global financial crisis.

Shin, a former Princeton University professor, is known to have close ties with many BOK officials including Rhee, having been a regular panelist at the bank's symposiums.

The governor can be reappointed for a four-year term only once.

(Reporting by Cynthia Kim and Jihoon Lee; Editing by Saad Sayeed and David Holmes)

((jihoon.lee@thomsonreuters.com;))