By Lee Hyo-sik
Staff Reporter
The top economic policy maker vowed to keep the growth rate above zero this year through more stimuli, credit easing, and deregulation.
Strategy and Finance Minister Yoon Jeung-hyun predicted Tuesday that the economy will get better in the second half of 2009, forecasting the current account surplus to top $13 billion, compared with a shortfall of $6.4 billion last year, the first deficit in 11 years.
Yoon said the government will make the labor market more flexible and will target creating more jobs. He added that without drastic measures, the economy would lose 200,000 jobs this year.
Yoon said without additional domestic demand, the economy will shrink 2 percent this year from 2008, slashing the government's official growth target of 3 percent.
If so, the nation will see its gross domestic product (GDP) fall for the first time since 1998, when output declined 6.9 percent in the aftermath of the Asian financial crisis.
He said that the minus 2-percent growth projection was based on those of private economic research institutes, stressing he will mobilize all possible pump-priming measures, including more fiscal spending, to stimulate domestic demand and raise the 2009 growth rate to above zero. The International Monetary Fund even said the nation's GDP would drop by 4 percent from 2008.
``However, the economy will improve in the second half of the year and start growing again in 2010. As for this year, the government will set aside more money to bolster sagging domestic demand. We will consult with the governing Grand National Party (GNP) about a supplementary budget and submit a bill to the National Assembly for passage next month,'' the minister said.
Yoon said the government would spend more taxpayers' money to create jobs and stabilize the livelihood of the lower-income bracket, while deregulating the services sector in a bid to boost private consumption.
He said the government will extend more credit to cash-strapped firms and provide more dollars to importers and dollar-short exporters.
In a move to cope with the worsening job market, Yoon said he will continue to promote existing policy measures and revise laws governing the labor market to make it more flexible.
``The government will improve the law concerning the status of non-permanent workers, the minimum wage and other labor-related issues that greatly affect low-income salaried workers. Tax breaks and other incentives will be provided to firms that hire new workers, while public companies will be encouraged to hire more paid interns,'' the minister said.
According to the National Statistical Office (NSO), the country lost 12,000 jobs in December from a year ago.
The minister said the government would establish a legal and administrative framework to help lenders carry out the much-needed corporate overhaul.
``The government will continue to purchase bad assets from and inject capital into banks that need sufficient liquidity to help them implement corporate restructuring without worrying about their financial soundness,'' Yoon said.
On the same day, Financial Services Commission (FSC) Chairman Chin Dong-soo said that the regulator will set up a corporate restructuring fund, which operates like a private equity fund (PEF), to facilitate the overhaul of struggling businesses.
PEF takes over management of businesses grappling with liquidity shortages, injects capital, turns them around, and sells the companies several years later for higher prices, returning capital gains to investors.
``The mechanism for the ongoing corporate restructuring will be improved to make it more efficient and market-oriented. We will continue to encourage creditors to play a leading role in accordance with the ``Corporate Restructuring Promotion Act.'' We will closely monitor the progress and provide necessary legal and administrative supports,'' Chin said.