Gov’t dispels worries about impending crisis

The country’s vice finance minister on Monday brushed off concerns in the local market about a possible economic crisis in April and gave his assurance that the government will act with a supplementary budget based on economic data from the first quarter.

“I don’t think we should be excessively pessimistic about our economy,” Vice Finance Minister Song Eon-seog said during a press conference at the government complex in Sejong. “Although Korea is still weak in private consumption, there are positive signs in areas like exports and facility investments.”

Market observers are worried about an impending crisis on par with 2008 when the U.S. Treasury Department releases its list of currency manipulators in April or July. Last year, Korea landed on a watch list along with China, Germany, Japan and Taiwan after it met two out of three conditions: an annual trade surplus with the U.S. of over $20 billion and a current account surplus exceeding 3 percent of GDP. If Korea is found by the U.S. Treasury Department to meet the third condition ? continuous intervention in its foreign exchange market ? it could be branded as a currency manipulator, and its export market could face backlash from the American government. This will undoubtedly affect the local financial market, which has become ever more superstitious about a crisis happening every 10 years (the last two were the global catastrophe in 2008 and the IMF crisis in 1997).

The vice finance minister said the government will consider a supplementary budget later this year based on economic performance in the first quarter. The government has already allocated 4.6 trillion won ($4 billion) to infrastructure projects in the private sector, “in hopes of boosting the economy and creating jobs,” Song said. “We also plan to center our investment of 180 billion won on 14 development projects on government-owned land.”

Song added that the government will begin issuing 50-year maturity bonds early next month “We plan to issue 1 trillion won worth this year,” he said, “of which 300 billion won will be issued first. We are also looking into expanding the issuance of bonds with maturity of 20 years or more.”

In hopes of attracting more institutional investors to its public corporations, the government is raising the bar on its dividends. Last year, the government was able to collect dividends of 30.3 percent, or 1.23 trillion won, from 36 state-owned enterprises, reflecting the companies’ improved management and performance. The government hopes to raise that figure to 40 percent this year.

“Last year, even under harsh conditions, thanks to various cooperation and efforts from public corporations, we were able to achieve performance that exceeded our initial target,” Song said. The government’s initial target was 28 percent.

“Today, because of the changing environment including structural changes in demographics and increasing welfare spending, there is gradual expansion of government spending,” he added. “As such, there have been demands on state-owned enterprises’ larger role in the nation’s fiscal management through steady business management and profit-making.”

BY LEE HO-JEONG [lee.hojeong@joongang.co.kr]