South Korea’s economy will remain on its course to a 3 percent growth this year, the nation’s top economic policymaker said Thursday, downplaying lower forecasts by think tanks on sluggish employment and investment.
“As for now, we have no plans to revise the 3 percent growth target,” Deputy Prime Minister and Finance Minister Kim Dong-yeon said in a morning radio interview with CBS.
“The economy grew 1.1 percent in the first quarter this year, which is more or less on the right track.”
His remarks came in answer to a question on whether the government is considering inching down the economic forecast to reflect the slower-than-expected recovery pace.
A number of local think tanks, including the Korea Development Institute, have recently suggested that the yearly growth rate is likely to stop at around 2.9 percent, citing sluggish employment and slowing investment trend in the equipment and construction sectors.
cap/Deputy Prime Minister and Finance Minister Kim Dong-yeon on Wednesday speaks in a press conference on the sidelines of the African Development Bank annual meeting held in Busan. (Yonhap)
“Economy is largely defined by (the public’s) sentiment,” Kim said, taking a prudent stance on the pessimistic perspective.
“The course of growth is surely moving toward the targeted 3 percent range, but it is true that some recent economic indexes have implied complex signals that may be interpreted in various ways.”
While consumer price inflation has been lingering near 1.5 percent for months, failing to approach the Bank of Korea’s 2 percent target, Seoul’s exports slipped 1.5 percent on-year in April, making the first negative move in 18 months.
Household debts, a chronic financial burden on Asia’s fourth-largest economy, reached a record 1,468 trillion won ($1.36 trillion) as of the end of the first quarter.
It was amid such slow growth concerns that the central bank on Thursday froze the country’s key interest rate at 1.5 percent in a widely expected move.
“It has become difficult to remain optimistic,” BOK chief Lee Ju-yeol recently said, citing the job market situation.
In a gesture to alleviate such mounting skepticism, Minister Kim underlined that qualitative growth of the economy is more important than individual index fluctuations.
“Our plan is to achieve a high-quality growth by promoting an even distribution of wealth,” he said, pointing out to the concentration of profits on specific industries such as the nation’s lucrative semiconductor sector.
The top policymaker also urged the country to take a flexible approach to the minimum wage plan in consideration to its economic implications.
The Moon Jae-in government raised the legal minimum wage by an unprecedented 16.4 percent this year to 7,530 won from 6,470 won, as part of the mid-term goal to further raise the amount to 10,000 won or more by 2020.
While the raise seeks to boost Moon’s economic slogan of income-led growth, it is also seen as having weighed down upon the local economy by heightening the job market entry level.
“If it turns out to be irrational or difficult to increase the minimum wage up to a designated level by a specific point in time, we should then approach the issue in a more flexible pace,” the minister said.
By Bae Hyun-jung (tellme@heraldcorp.com)