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The government announced its economic policy plans for the second half of the year Wednesday, projecting growth in the upper 4 percent range for the year. Finance Minister Kang Man-soo said Korea¡¯s economic growth rate could slow further depending on global oil prices, and added that the government will put priority on stabilizing prices.
Just four months after the inauguration of President Lee Myung-bak, his so-called ¡°7-4-7¡± economic policy objective -- 7 percent economic growth each year, US$40,000 per-capita income in 10 years, and becoming the world¡¯s seventh-largest economy -- is apparently dead in the water.
The government described this year¡¯s economic situation as a ¡°crisis.¡± It projects the country¡¯s current account deficit at around $10 billion, while at most 200,000 new jobs would be created. The centerpiece of the election promises, which touted job creation as being the best social welfare program and promised 600,000 new jobs each year, has been dealt a huge blow. Consumer prices have been forecast to rise up to 4.5 percent due to increases in oil, grain and other raw materials prices -- about 2 points higher than the 2.5 percent rise in consumer prices last year. An official at the Ministry of Strategy and Finance said monthly rises in consumer prices could surge to more than 6 percent if international oil prices rise further. In short, growth is slowing while consumer prices are soaring.
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An electronic display at the Korea Exchange in Yeouido, Seoul shows stocks tumbling on Wednesday, when the sidecar mechanism was activated for the third time this year.
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The Lee administration came into office on the back of pledges to revive the economy. But it is having a tough time stemming stagflation and maintaining the present economic growth rate, let alone stimulating growth. The main reason for this is the global oil prices, but another is that Lee lost the trust of the public by failing to live up to their expectations on important issues such as U.S. beef imports, driving his leadership into crisis.
Most key policies have either been scrapped or are adrift. The W14 trillion (US$1=W1,042) cross-Korea canal project has been halted due to public opposition. Also being delayed is the privatization of state-run businesses, which the Lee administration was to use to invigorate the economy. It had planned to privatize 40 to 50 state-run businesses, including Hynix and other companies in which the government owns stakes. But an announcement of the privatization schedule, originally expected in June, has been delayed because government has been paralyzed due to the fallout from the mad cow scare.
In real estate policy, the Lee administration has been unable to realize its campaign pledge to reform the controversial comprehensive real estate tax and scrap excessive taxes introduced by the previous government. The only campaign pledges that are being kept are the lowering of corporate taxes and the privatization of Korea Development Bank.
One Cheong Wa Dae official said it was due to worsening economic conditions that the pledges were not being pursued. But he added the reason the Lee administration was elected was to achieve economic growth, and the delay does not mean those goals have been scrapped.
(englishnews@chosun.com )
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