MBnomics Undergoes Drastic Change
By Yoon Ja-young
Staff Reporter
The government has given up on the rosy economic pledges made by President Lee Myung-bak during the presidential election, lowering its economic growth outlook to below 5 percent from 6 percent, and its annual job creation target to 200,000 from 350,000.
Behind the downward adjustments are negative external economic factors and wavering presidential leadership, but even these humble targets may be hard to achieve.
The government announced its economic management plan for the latter half, Wednesday, and estimated the economy to grow 4.7 percent this year, a huge drop from the 6 percent targeted in March.
President Lee had pledged a 7 percent growth rate before the election, and curried a favorable response as the ``savior'' of the economy.
The administration also slashed its job creation target to 200,000, down 150,000 from the March announcement, and even lower than the 282,000 jobs created in 2007.
Consumer prices were expected to rise 4.5 percent, 1.2 percentage points higher than the 3.3 percent initial target, and up from the 2.5 percent last year.
The outlook on the current account was also worrisome. The deficit is expected to hover around $10 billion, $3 billion more than the March estimate. In 2007, Korea posted a $6 billion surplus.
When the government announced 6 percent economic growth and 3.3 percent inflation targets in March, many economists expressed concern that policymakers were sticking to the unrealistic, rosy economic pledges made by the President despite the growing external negatives.
It consequently lost the opportunity to effectively cope with a worsening economy, as even the new targets can't be guaranteed as they are based on estimates that global oil prices will stop rising. The 4.7 percent growth target is still higher than the 4.1 percent forecast by the International Monetary Fund, and 4.3 percent predicted by the Organization for Economic Cooperation and Development.
``Macroeconomic indices are heading down due to the rise in oil, crop and natural resources prices,'' said Yim Jong-ryong, director general of the economic policy bureau at the Ministry of Strategy and Finance. He said the numbers this time reflect reality, while the figures in March were targets.
He said taming inflation is the economic policy priority this year.
Consumer prices rose 5.5 percent in June, the biggest rise since the Asian financial crisis in 1998, adding to the concern that the economy might have already fallen into stagflation.