By Na Jeong-ju
Staff Reporter
President-elect Lee Myung-bak's policymakers have revised down their economic growth target to 6 percent for this year, but many economists believe the goal will be hard to attain given the global economic downturn.
The central bank is not so optimistic, either. In December, the Bank of Korea (BOK) cut its growth forecast for 2008 to 4.7 percent from its previous 4.8 percent projection, citing the fallout from high oil prices and U.S. subprime mortgage problems.
Some officials worry Lee's growth-oriented policies may affect the BOK's hawkish monetary stance, pushing the bank to adopt growth-spurring measures at a time when inflationary pressure is surging as a result of economic expansion and liquidity growth.
On Tuesday, BOK working-level officials will meet with Lee's transition team to share monetary policy goals and discuss ongoing issues in the financial sector. During the meeting, the bank may call for the need to curb inflation and ease financial market volatility, but the transition team may have their own subjects to talk about.
``The incoming government may resort to stimulus packages to achieve its growth goal, but we see growing downward pressure at the moment,'' a BOK official said. ``There is the possibility that Lee's economic policies will be in discord with BOK's ideas, but we will be able to find something that we have in common.''
For BOK officials, the fact that one of Lee's key economic architects has a long history of conflict with the bank is quite embarrassing.
Former Vice Finance Minister Kang Man-soo, head of the economic affairs subcommittee on Lee's transition committee, overseeing macroeconomic policy issues, was often at odds with the BOK in the 1990s when he worked at the ministry.
He had openly demanded the central bank refrain from raising the key interest rate to keep borrowing costs low and boost economic activity, clashing with the bank's policy that places top priority on taming inflation through interest rate hikes. He recently said keeping interest rates low was the key to boosting economic activity along with low tax rates.
Kang may demand the central bank take a dovish stance in conducting its monetary policies to accelerate growth, but BOK officials say all policies depend on how the market will react.
``This year, we have to deal with growing downward risks on the economy, and rising inflationary pressure at the same time,'' BOK Governor Lee Seong-tae said last week. ``Policy priorities should be placed on curbing inflation, stabilizing the financial market and achieving solid economic growth.''