Finance nominee says 3.1% growth possible this year

Yoo Il-ho, the finance minister nominee, swears an oath before the National Assembly’s hearing on his appointment as the nation’s chief economic policy maker in Yeouido, western Seoul, on Monday. [KANG JUNG-HYUN]

Yoo Il-ho, the nominee for finance minister, emphasized at a National Assembly hearing on Monday that he would not allocate a supplementary government budget to force economic recovery.

Instead, he would focus on solidifying the government’s fiscal soundness, arguing the Korean economy has the strength to achieve growth of 3 percent or higher on its own.

Such confidence, however, comes at a time when think tanks in Korea and abroad have largely been projecting mid-2 percent growth for this year, especially as the economy of China, Korea’s biggest trading partner, has been lagging.

Even the state-run Korea Development Institute projected 2.6 percent growth for this year.

“The Korean economy is capable enough to reach 3.1 percent growth in GDP without a supplementary budget this year,” Yoo said during the hearing held at the National Assembly on Monday.

The nominee dismissed speculations of earmarking for an extra budget this year, implying a slight scale-back of the government’s expansionary fiscal policy.

“Some institutions have released very low forecasts for the Korean economy, but there are some with [higher ones],” Yoo said in response to a lawmaker’s question about the growth goal. “The fiscal policy could be less expansionary than before, but we can reach the 3.1 percent goal if we do our best.

“To achieve this goal, we need to have the [pending] economy and reform-related bills passed.”

The economist-turned-politician said one of the biggest reasons he is not considering a supplementary budget this year is because of the government’s dwindling fiscal capability.

“I will make hard efforts to manage the national debt level and fiscal soundness by adjusting expenditures and adopting new rules for fiscal policy,” he said.

Yoo stressed that his goal is to make an all-out effort to push for structural reform, which falls under the Park Geun-hye administration’s three-year economic innovation plan.

The nomination of the economist-turned-lawmaker as Park’s third finance minister is seen as an attempt by her administration to use Yoo’s experience as a two-time elected politician to drive forward with reforms, including structural labor reforms, that have been held back by opposition lawmakers.

“We should concentrate our capabilities on overcoming uncertainties and grave structural problems surrounding the economy,” Yoo said. “[As the deputy prime minister for the economy and finance minister], I will focus policies on improving the fundamental health of the economy.”

Yoo also expressed his views on the controversy surrounding the housing market and ever-growing debt. The nominee said he will continue to ease regulations on the loan-to-value and debt-to-income ratios for lenders to help further boost the housing market.

This has been a stark contrast to other government officials and financial regulators, including Bank of Korea Gov. Lee Ju-yeol and Financial Services Commission Chairman Yim Jong-yong, who have been raising alarms over the growing debt and stressing the need for tighter regulations.

Kang Ho-in, the minister of land, infrastructure and transport, also cautioned against the glut in new apartments, as it could cause housing prices to decline and eat into the personal assets of many Koreans who have invested in such properties.

“Although it is not an immediate threat to the economy, I will keep making efforts to lower household debt to prevent the issue from being a hurdle to economic revitalization,” Yoo said.

BY SONG SU-HYUN [song.suhyun@joongang.co.kr]