Bahk contrite on inflation war

Finance Minister Bahk Jae-wan has apologized for failing to adequately tame inflation one year after taking office.

“Although there has been some stabilization in prices, the government regrets failing to make consumers realize the achievement,” he said at a press conference in Gwacheon, Gyeonggi, yesterday.

“Looking back when I took office a year ago, consumer prices were very high and torrential rains dealt a severe blow to our livelihoods that summer, all of which had a significant impact on supply prices of daily necessities,” he added.

However, the minister took positives from the fact that skyrocketing prices have shown signs of calming in recent months. “I am reassured by improvements in economic indicators and in the labor market. Around 440,000 jobs were added to the market over the past year,” he said.

He acknowledged the wide gap between economic indicators and what consumers actually feel about prices, and pledged to try and align the two.

Bahk went on to mention areas in which the government has made improvements: notably, income rises in the bottom 20 percent of the population; increases in the number of regular workers; three-quarter drops in growth of household debt; and more tightly controlled household credit.

“If the current trend continues, we could reasonably expect a soft landing for our economy,” he said, adding that the government has adopted three key measures to reduce the impact of external shocks.

“We have prepared sufficient bumpers to minimize [these] by increasing currency swaps with China and Japan, ramping up our financial contributions to the International Monetary Fund, and enlarging our investment frameworks,” he said.

In his view, the government has successfully managed the macro-economy to afford greater stability, he said, citing the fact that two of three international credit rating agencies have upgraded Korea’s rating.

But he stressed that Korea remains far from immune to risks spilling over from the troubled euro zone.

Bahk also declined to comment on the falling value of the won, which hit a seven-month low of 1,185.5 won against the greenback yesterday.

“The goal of the economic policy this year has been pursuing stabilization, while seeking growth,” the minister said. “We have made some tangible achievements in the former, but less in the latter.”

He also pointed to problems in the domestic property market, which is still mired in recession. The government’s May 10 policy package to normalize real estate transactions was a failure, he conceded. And exports have been relatively slow to improve in the first five months of the year despite recently implemented FTAs with the United States and European Union, he said.

“But the government won’t chase after an artificial growth,” he added.
By Song Su-hyun [ssh@joongang.co.kr]