SEOUL, South Korea – South Korea’s newly-named finance minister said Wednesday the recovery in Asia’s fourth-largest economy is weak and might need additional government stimulus.
Hyun Oh-seok told parliament that South Korea’s economy may not achieve the 3 per cent growth projected by the government and he would quickly introduce measures to aid the recovery.
His remarks gave more weight to the view that President Park Geun-hye’s new economic team will boost government spending with a supplementary budget.
“I agree that the economic situation is grave,” Hyun said at a parliamentary hearing on his nomination as finance minister.
Latest data show South Korea’s economic recovery is fragile. In the first two months of the year, exports, which account for about half of the country’s economic output, eked out a feeble 0.6 per cent increase over a year earlier. January government reports showed industrial output, private consumption and investment remain poor.
In a written statement to the National Assembly, the new economy head said there is a “big risk that even the weak pace of recovery would stumble” because of uncertainties in the U.S. and Europe while South Korean consumer confidence and corporate sentiment are far from the recovery.
The finance ministry projected in December that South Korea’s economy, one of the wealthiest in Asia, will expand 3 per cent this year. It grew 2 per cent in 2012, which was the slowest rate since 2009. The central bank has forecast 2.8 per cent growth for this year.
“It will not be easy for the economy to see a dramatic improvement in a short period of time,” Hyun said. “We need active policies to stimulate the economy and resolve the difficulties of low-income families.”
Park took office in February promising a better economy. Her top economic pledges were more jobs, which appealed to a growing number of unemployed college graduates, and fairer business practices in a country where family-owned conglomerates dominate commercial life.
She has said she wants to strengthen the middle class by raising the employment rate to 70 per cent by 2017 and easing household debt with a fund that will cancel part of the debts of borrowers with bad credit who can’t keep up repayments. In 2012, South Korea’s employment rate was at 64.2 per cent according to the Organization of Economic Co-operation and Development.
Hyun said his first priority as finance minister is creating new jobs.
“Using female workforce is the key,” Hyun told lawmakers.
The finance minister ruled out raising taxes to fund Park’s welfare pledges such as free childcare services, which lawmakers and the minister estimated would cost 27 trillion won ($24.6 billion) per year. Hyun said the ministry will seek to increase revenue by reducing tax breaks and cracking down on tax evasion.