Deputy Prime Minister and Minister of Finance and Economy Han Duck-soo began his June 10 weekly press briefing with saying that the Korean economy is on its way to a recovery, despite difficulties such as economic polarization and slower than expected growth. DPM Han projected for a three percent growth in the second quarter and a growth of four-five percent in the second half nearly matching growth potential.
He then reiterated at the briefing that five percent growth looks difficult to achieve this year although the government will still keep it as a reference point.
Since the economic crisis, economic growth pendulum each year has been swinging back and forth greatly, suggesting that the economy is still in the process of restructuring. Though not satisfactory, quality of growth is improving and the economy is getting back on a growth track. DPM Han called on all economic players to make concerted efforts and renew our commitment to reviving the economy.
Speaking of the issues and outcome of the macroeconomic experts meeting held on June 8, 2005, DPM said that the experts assembled all agreed that growth momentum of the global economy will begin losing steam due to rising oil prices and volatile international forex markets.
The US economic growth in the second half is likely to post 3.2% which is a similar level to the first half growth of 3.4% due to inflationary pressures, unstable oil prices and the slowing economy.
“The US economic growth is expected to exceed growth potential for some time; however, concerns over growth slowdown is gaining ground in view of slowing real indicators compiled by the Institute for Supply Management (ISM) and falling long-term interest rates.
Global oil prices and foreign exchange rates which have rendered difficulties in the first half are likely to reinforce high oil prices and weak dollar trends in the second half as well. As for domestic economic conditions, earlier in the year positive economic sentiment toward a recovery emerged strong but as recent economic indicators have failed to support this sentiment, concerns over an economic recovery is gaining pace. As for the recent economic conditions, the majority view that it should be monitored for a bit more before evaluating and coming up with responses. In the second half, domestic-led growth is expected to set in, but as for the pace of recovery, uncertainties remain.”
Exports are expected to maintain a 10% growth in annualized terms, along with around 10% growth in the second half. Voices of concern were also heard that the economy should take all reasonable precautions against downside risks such as deterioration of export profitability due to the won appreciation and possible slowdown of US and Chinese economies.
DPM Han said of the IMF Article IV biannual consultation, that the IMF mission was convinced that an economic recovery is on its way. The IMF mission visited Korea from May 30 to June 7 to discuss the economic outlook and the policies needed to promote the recovery. The IMF mission agreed that the economy shows credible performance and it supports the Korean government’s macroeconomic policies. Brushing off the concerns over the economy in Korea, the mission said it would stick to its original growth forecast of four percent for Korea.
It expected that growth will accelerate in the second half pointing out that consumption is increasing in a respectable way.