Ministries to tighten ties as tough year expected

Korea will intensify intra-government policy coordination and market monitoring this year in order to minimize any impact that external challenges could have on its export-driven economy, the Ministry of Strategy and Finance said yesterday.

“We will beef up coordination among ministries and agencies in responding to global fiscal debt problems and other crisis situations,” said the ministry in a report that details its economic policy direction for 2012.

“We will also establish a round-the-clock monitoring system and cope with destabilizing factors stemming from home and abroad in a preemptive manner.”

This policy direction, which was reported to President Lee Myung-bak yesterday, is in line with the government’s gloomy assessment of the global economic condition.

Faced with the euro zone debt crisis and a possible global slowdown, the government recently downgraded its growth outlook for this year from 4.5 percent to 3.7 percent - slightly beneath the 3.8 percent growth projected for last year.

The ministry painted a grim picture for exports, forecasting that the nation’s overseas sales will expand 7.4 percent this year, far slower than a 19.2 percent expansion for this year.

On Monday, Finance Minister Bahk Jae-wan said in his New Year’s speech that economic conditions are expected to become “difficult and uncertain” this year.

The ministry expects the nation’s economy to face tougher conditions in the first half than in the second half, saying that it will front-load 60 percent of its budget spending in the January-June period in order to sustain growth.

The ministry added that it has prepared a “three-step” contingency plan designed to better insulate the nation’s economy from turbulent and vacillating market situations.

At the highest crisis level, when excessive capital outflow takes place and the real economy slips into recession, the ministry noted that it would react by injecting capital into financial institutions, securing more foreign reserves and stabilizing the overall financial system.

The government will also adopt an “expansionary” macroeconomic policy that could include an increase in the government’s fiscal spending to sustain economic growth, according to the ministry.

Meanwhile, the government plans to expand tax incentives aimed at encouraging investment from domestic and foreign companies, while making efforts to improve the overall business environment, it added.

Yonhap