Economy Stimulus Measures Eyed
By Lee Hyo-sik
Staff Reporter
The government is set to introduce a range of stimulus steps this month to boost the economy as growth is projected to slow toward the year's end on the U.S. economic slowdown and other worsening external conditions. The measures, among others, will likely include the strengthening the competitiveness of the services industry, deregulation and tax cuts.
Stimulus tools will be implemented, contrary to the government's earlier pledge, as surging international raw material prices and a slowdown in the global economy are increasingly putting pressure on the world's 13th largest economy, making it almost impossible for the government to achieve its growth target of 6 percent this year.
President Lee Myung-bak and Strategy and Finance Minister Kang Man-soo pledged that the government would not carry out artificial stimulus means to boost the economy under any circumstances.
However, the Ministry of Strategy and Finance said Thursday that it will unveil a comprehensive package of stimulus measures this month to spur economic growth.
``The government will make an all-out effort to accomplish this year's gross domestic product (GDP) growth target of 6 percent. We will introduce market-friendly steps, including deregulation and tax cuts, rather than expansionary fiscal spending, to promote corporate investment and private consumption,'' a ministry official said.
He said the Korean economy has expanded mainly on strong outbound shipments over the past years, adding domestic demand and business investment should play a larger role offsetting falling exports.
``We estimate the economy grew by just below 6 percent in the first quarter from a year earlier, which is not bad at all, when considering the host of external negatives. But the problem is that the economy will likely head downward from here on deteriorating external conditions,'' he noted.
Private economists also echo the government's views. LG Economic Research Institute senior economist Song Tae-jung said the economy will likely peak in the first half of the year and descend afterward. ``We expect the GDP to expand by around 5.5 percent in the first quarter. If the U.S. economy continues to deteriorate and oil and other commodity prices remain high, economic growth could fall to as low as 3 percent in the second half,'' he said.
Song noted that to engineer a soft landing of the economy, the government should carry out large-scale construction projects, including a cross-country canal, and other stimulus initiatives to boost the economy.