Korea's economic growth likely to fall short of 2% next year, finance minister warns

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Korea's economic growth likely to fall short of 2% next year, finance minister warns

Published: 23 Dec. 2024, 16:26 Updated: 23 Dec. 2024, 19:25

SHIN HA-NEE
[email protected]

Audio report: written by reporters, read by AI

Finance Minister and Deputy Prime Minister Choi Sang-mok speaks during a press conference with local media outlets at the government complex in Sejong on Dec. 23, the first occasion of its kind since President Yoon Suk Yeol's martial law declaration on Dec. 3. [MINISTRY OF ECONOMY AND FINANCE]

Korea’s economic growth next year is likely to fall below the potential growth rate of 2 percent, Finance Minister and Deputy Prime Minister Choi Sang-mok said Monday, vowing that the government would implement “unprecedented” measures to stimulate the weak economy regardless of the ongoing political turmoil.

Choi, however, prioritized implementing the already-approved budget over pursuing additional expansions despite growing calls for a supplementary budget plan to be passed in the first quarter of next year, merely stating that the ministry “will review” its options for additional fiscal measures based on future conditions.

The comments came during a press conference held at the government complex in Sejong on Monday, the first of its kind with local media outlets since President Yoon Suk Yeol’s martial law declaration on Dec. 3.

Regarding the martial law decree, the deputy prime minister said that he, as a Cabinet member, accepted responsibility for the incident but largely refrained from directly addressing the matter.

"It would be unavoidable to lower next year's growth forecast,” said Choi. "It is highly likely [the growth rate] will fall slightly short of the potential growth rate.”

The Finance Ministry has previously expected the economy to grow 2.2 percent next year. The adjusted growth forecast will be announced with next year's Economic Policy Directions, set to be released before the end of this month.

The Bank of Korea (BOK) already lowered its growth forecast for next year from the previous 2.1 percent to 1.9 percent on Nov. 28.

The central bank estimated Korea’s potential growth rate — the maximum output possible without stimulating excess inflation — at 2 percent. Persistent real GDP growth below the potential growth rate could signify that the economy is entering a period of subdued growth.

While high-profile policymakers, including BOK Gov. Rhee Chang-yong and Democratic Party lawmakers, have been calling for the prompt implementation of an expansionary policy measure, Choi remained reluctant to confirm the ministry’s stance on additional budgets.

“I agree with opinions that the government needs to play an active role amid persisting difficulties in livelihoods and economic uncertainties,” Choi said.

“But regarding fiscal policy, since next year’s budget plan was recently approved and is yet to be implemented, I believe the priority should be on making utmost efforts to promptly execute the budget starting Jan. 1,” the minister stressed.

“We are making an unprecedented shift in our approach to implementing measures that the public and companies can feel right away,” the minister added, noting that the ministry is currently pushing to expedite the allocation of at least 11.6 trillion won ($8 billion) before the beginning of the fiscal year so that the budgets can be implemented as soon as the year starts.

As one of the ministers who attended the Cabinet meeting ahead of Yoon's martial law declaration, the deputy prime minister said he accepted responsibility "as one of those who failed to prevent this situation from happening.” However, he did not deliver any additional messages regarding the matter, saying that “questions about the documents filed to the investigation authorities should be asked to the authorities.”

The police special investigation team handling the case said Sunday that it had acquired a document Yoon handed to Choi during a Cabinet meeting that took place shortly before the martial law declaration, which reportedly outlined measures to cut off operational expenses for the National Assembly and to form a budget for the legislature under martial law.

“I have nothing left to elaborate further aside from the answers I offered to the parliament,” said Choi.

The Finance Ministry is currently "not in discussion" with the presidential office regarding next year's Economic Policy Directions, according to the minister.

BY SHIN HA-NEE [[email protected]]