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Economic growth forecast to hit 5%

Officials to keep stimulus going to foster employment

Dec 11,2009
The government yesterday officially upgraded its forecast for Korea’s economic growth next year to 5 percent from 4 percent. It also expects the economy to achieve positive growth of 0.2 percent this year.

But officials said it will take more time for the private sector to fully grow on its own, so the government will keep an expansionary policy stance, focusing on job generation.

The Finance Ministry announced the forecasts in a meeting held in the Blue House to discuss 2010 economic policies. The meeting was presided over by President Lee Myung-bak and attended by 150 government officials, businessmen and private-sector economists. “We should not get complacent at least until the end of next year’s first half,” Lee said in the meeting, citing uncertainties over the global economy. “We should keep expansionary fiscal policy and pre-emptively implement fiscal spending,” he also said. He added that Korea implemented budget spending the most quickly and aggressively in the world this year and that it was “successful.”

Private consumption, companies’ spending on capital growth and construction investment will grow by 4.2 percent, 11 percent and 3.2 percent respectively in 2010, according to the ministry. Though Korea’s exports will grow 13 percent next year from a contraction this year, its current account surplus will narrow, because imports will increase by 21 percent on recovery of consumption and capital spending, the ministry added.

As employment tends to lag behind economic recovery, the number of employed will increase a modest 200,000 in 2010, the ministry said. Accordingly, the government will focus on generating jobs and, as part of the policy, it will temporarily operate a monthly employment strategy meeting presided over by the president, it said. In the employment strategy meeting, the officials will discuss how to extend the range of public companies where they are allowed to place alternative workers in the case of strikes. Currently, railway, airport and some other companies are included in the range.

And, to boost the leisure and tourism businesses and their employment, the government will discuss reforming the current holiday system so that, if a national holiday falls on Saturday or Sunday, Friday or Monday should instead be designated as the holiday.

Other measures to boost the economy were also discussed in yesterday’s meeting. The government said that it would start second-stage work on the four rivers restoration projects before the end of March and will complete at least 60 percent of total work by the end of next year. The credit guarantees by state-run funds for small and midsize companies hit by the global financial crisis will be extended until the end of the first half of 2010. They had been scheduled to expire at the end of this year. On the other hand, state guarantees for banks’ foreign currency debts will expire at the end of this year as scheduled. The government added it will keep the tightened restrictions on banks’ mortgage lending.

Separately, the nation’s central bank kept the key rate unchanged at a record low of 2 percent for the 10th straight month yesterday. Still it emphasized a preparation for an exit strategy, displaying a somewhat different position than the government.


By Moon So-young [symoon@joongang.co.kr]



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