Growth rate will fall below 4 percent
By Kim Yoo-chul
Korea’s leading business lobby said currency volatility will be the top parameter for the local economy next year.
The chairman of the Korea Chamber of Commerce and Industry (KCCI) Sohn Kyung-shik expects the nation’s total trade volume for the full next year to reach $1 trillion, which is equivalent to Korea’s total GDP and also called for currency authorities of helping export-driven companies with ``better currency management.’’
``Currency moves will be the top concern for the national economy in 2011. There are some possibilities that the eurozone will fall into economic trouble again, while worries over Beijing’s measures to tighten credit still remain. Also, excessive global liquidity will make the currency see more volatility,’’ said chairman Sohn, Monday.
Sohn added Korea’s leading exporters will maintain their price competitiveness ahead of bigger overseas rivals in key markets only if the dollar-won exchange rates move within 1,100 won against the greenback.
The KCCI forecasts the nation will see a single four percent economic growth rate in 2011, which is considerably lower than this year's 6 percent growth as exports, investments and consumer spending are expected to see staggering moves.
``Therefore, the government will inject more resources to revitalize the construction and service industries for more hiring and to spur consumer spending,’’ the chairman claimed at a dinner meeting with local reporters in Seoul.
The body has asked the government to expand accommodation for the tourism industry and to cut tax.
For the revitalization of the construction industry, KCCI said tax benefits will be expanded to home buyers in metropolitan areas.
When asked about lowering corporate and income taxes, Sohn said; ``As planned, the cuts will materialize to guarantee consistencies in policy and boost companies’ competitiveness.’’
The issue of corporate tax has still been one of the sticking points before its introduction. Korea still has a 22 percent corporate income tax rate, though the government has a plan to lower it to 20 percent from 2012.
``That’s good news that the temporary measure for the tax deduction program has just extended one year more, however, it’s bad that the deduction rate has been lowered to between 4 and 5 percent from an earlier 7 percent,’’ Sohn said.
Earlier this month, Tokyo decided to seek a 5 percentage point cut in corporate income tax in the hopes of creating more jobs, attracting more investment and helping businesses use the money that will be saved from the tax cut to lift its economy.
The Japanese government could also limit deductions on taxable income for salaried workers with annual pay of more than 15 million yen and significantly cut the deduction amount for executive compensation of over 20 million yen, said sources.