![]() |
Choi Kyung-hwan |
This is the first time for the minister, who has pushed a series of stimulus packages dubbed "Choinomics," to say the growth rate will fall short of the government's forecast.
On Saturday in Russia, the finance minister said on the sidelines of a visit to a Hyundai Heavy Industries' corn farm, "It may be hard to achieve the 3.1 percent growth target for this year because exports' contribution to national economic growth is falling further due to a decline in global trading volumes."
Analysts said his remarks implied that Choinomics ― highlighted by a set of measures to encourage households to borrow more to buy apartments, and a 46-trillion-won supplementary budget ― was being phased out, having done little to boost the economy.
Choi has made it clear that he will soon step down to run in the general election next April, saying, "There are many people other than me who can run the economy well."
It is widely believed that Choi, who has been at the helm of the economy for 18 months, will quit in December.
He is drawing a barrage of criticism from experts who say he has abused macroeconomic policies for his own political purposes since President Park Geun-hye named him to the significant post in July last year.
Analysts said Choi's aggressive but less-effective stimulus policies had merely pushed up household debt to more than 1.1 quadrillion won.
Some of the loans extended at lower rates to low credit rated customers might become non-performing and be a burden on the economy, they said.
"We don't expect much from this government," a senior bank executive said. "It has pledged to carry out labor and financial reforms, but they are likely to end up being mere slogans.
"Choinomics is over. The government should have focused on deregulation among other things."
Analysts also said the government had been too optimistic about the outlook.
"The government's growth target remains too lofty to achieve under current market conditions," said Samsung Securities analyst Kim Yong-gu.
Other economists said that external conditions, especially the slowing Chinese economy, would keep the Korean economy from posting any substantial rebound.
They added that China's recent rate cut might boost demand, but it will not help Korea achieve 3.1 percent economic growth this year.
"China's extended monetary easing aimed at pumping more money into the economy and helping lower borrowing costs will allow local businesses to increase their imports from Korea and other major trading partners," said Samsung Securities' Kim.
According to analysts, there is a wide gap in the growth forecasts of private economic institutions and state-run organizations.
Most private think tanks expect Korea to grow by 2.5-2.7 percent this year.
Last week, the Bank of Korea (BOK) lowered its growth outlook to 2.7 percent from its July projection of 2.8 percent, citing China's slowdown as a major threat to Asia's fourth-largest economy. Korea's economy grew 3.3 percent last year.
In the July-September period this year, Korea's economy grew 1.2 percent from a quarter earlier, after posting quarterly growth of less than 1 percent in the past five consecutive quarters, BOK figures show.
To reach 3.1 percent growth this year, however, growth of nearly 2 percent is needed in the fourth quarter alone.
But Lee Jung-beom Korea Investment & Securities, analyst Lee Jung-beom said this looked to be impossible because the economy was expected to grow just 0.8 percent to 0.9 percent in the fourth quarter.