Minister Hints at Shifting Policy Direction
By Lee Hyo-sik
Staff Reporter
The nation's top economic policymaker said Thursday that the government will begin discussing an exit strategy from the current expansionary fiscal policy mode.
In a meeting with heads of major economic research institutes, including the state-run Korea Development Institute (KDI) President Hyun Oh-seok, at the Bankers' Club in downtown Seoul, Strategy and Finance Minister Yoon Jeung-hyun said the government needs to discuss effective ways of shifting its policy stance.
"We are not sure at the moment whether to continue our current policy posture or abandon it. I think at least we should now start considering what policies we are going to introduce after the ongoing economic downturn is over. I would like to hear from all of you on this issue,'' Yoon said.
His remarks indicate that the government has become more optimistic about an economic outlook and is willing to shift its economic policy direction to better deal with the post-crisis era.
Asia's fourth largest economy is widely expected to show an upward trend toward the year's end and beyond with the easing of the global financial market turmoil, turning policymakers more bullish. In turn, they have become more concerned about inflationary risks as a result of massive stimulus packages and ample liquidity amid the loose monetary policies.
Earlier, Yoon said the nation should remain cautious about an economic outlook, despite a series of encouraging indices in recent months, adding the government would continue expansionary fiscal policies at least for the remainder of the year.
The minister then asked heads of research institutes about how to boost Korea's growth potential, create jobs, stabilize the livelihoods of low-income families, make the labor market more flexible and advance the services sector.
In response, they said the government should exercise greater caution over timing of the policy shift.
"If the government abandons its current expansionary policies too soon, the economy may head downward again," they said. "If stimulus measures are in place for too long, it will create inflationary pressure. The government should be extremely careful about the issue.''
Heads of the think tanks also said international oil prices will likely continue to show an upward curve, adding there are still a number of downside risks overseas that could rattle the domestic financial market.
"The government should remain vigilant and closely monitor changes in the global financial market,'' they said.