Growth target hiked to 2.7%
By Na Jeong-ju
The government plans to pump prime the economy to achieve 2.7 percent growth in the second half, up from its earlier prediction of 2.3 percent.
The current-account surplus also hit a record high in May.
Strategy and Finance Minister Hyun Oh-seok said he will put top priority on getting the economy out of a low-growth trap through increased public spending and job creation. He forecast annual growth will reach 4 percent next year, if the government’s growth-oriented policies are implemented successfully in the coming months.
“We will create 300,000 jobs this year and 480,000 jobs next year while reining in consumer price rises. Ending the low growth trend is our No. 1 goal,” Hyun told reporters after a meeting with senior economic policymakers, Thursday.
The optimistic outlook represents confidence among government officials that Asia’s fourth-largest economy will remain on a solid growth path despite woes about external risks ― the U.S. move to scale back its monetary stimulus, a possible hard landing for “Abenomics” and China’s credit problems are weighing on the Korean economy.
The Bank of Korea said the current account surplus, the broadest measure of cross-border trade, hit an all-time high in May as exports posted robust growth while imports declined.
The surplus reached $8.64 billion, up from a revised surplus of $3.93 billion the previous month. The country has recorded a current account surplus for 16 months in a row, and its cumulative surplus amounted to $22.54 billion this year, the central bank said.
Exports increased 7.4 percent year-on-year to $49.6 billion while imports declined 4.8 percent to $42.3 billion.
Hyun cautioned that volatility in the financial market could rise further in the second half due to uncertainties about the global economy.
“We need to reduce our exposure to external negatives with a good mix of economic policies. But I’m confident that the economy is now on the right track,” he said.
The government’s growth forecast is more optimistic than estimates given by global organizations and major research institutes. A month earlier, the Organization for Economic Cooperation and Development revised down its growth forecast for the Korean economy from 3.1 percent to 2.6 percent, citing the unstable global economic situation.
The Hyundai Research Institute also recently cut its growth outlook from 3.1 percent to 2.6 percent, citing a slower-than-expected recovery in the first quarter. Korea’s gross domestic product grew by less than 1 percent for the past eight consecutive quarters.
The ministry said it will assign much of the money secured from its extra budget plan during the third quarter and expand its fiscal spending on social overhead capital including power generating facilities by about 500 billion won this year.
It also plans to unveil a set of measures in July designed to bolster business activity in the service sector ― a move expected to help stimulate overall domestic demand.
The ministry forecast Korea will register a current account surplus of $38 billion this year, up from its previous outlook of $29 billion. Consumer prices will likely grow 1.7 percent, lower than the 2.3 percent gain it predicted in March.