On a macroeconomic level, the Korean government will focus on paving the way for a private-led economic recovery. On Dec 10th, President Lee participated in the public-private forum on the direction of economic policy to discuss how to steer the Korean economy in the right direction. The government's expansionary macroeconomic policy will be put in place until the private sector bounce back on its own. Unveiling the 2010 economic policy direction, the government said, "it will maintain its expansionary macroeconomic policy for the time being in order to cement the current economic recovery. Through its expansionary macroeconomic policy, it lays the groundwork for the private sector to rebound on its own."
It said it will incrementally adapt its expansionary macroeconomic policy in consideration of economic conditions, employment, and so on. The Korean government predicted that economic factors -such as households, companies, and financial companies- are likely to maintain their conservative economic participation due to the financial volatility lingering in the market. Therefore, the Korean government underlined the need for a proactive fiscal policy, because they expected rapid recovery in consumption and investment would hit the wall before they fully materialize in the market.
The government will maintain its effort to soften its financial policies for the time being and will be on ready mode to respond to any changes in the market in line with consumer prices and the conditions of the economy and financial markets. It is also, planning on keeping the level of household and corporate debts in check as part of its effort to launch preemptive responses to any risks that can arise from rolling back its macroeconomic policy. In addition, ad-hoc measures such as extending credit guarantees will bow out when their implementation period expires, but the Korean government will come up with follow-up measures to cushion any blows to the market.
The measure of extending guarantee terms will be put in place by the first half of next year, but the Korean government said it will step up its screening procedures to properly select candidates for guarantee extensions. It is also poised to create jobs and bring a sense of stability to the market through its effort to boost domestic demand and make improvements to Korea' export-led economic growth. To do so, it will ease regulations and upgrade the service industry.
In order to improve the corporate governance of Korean companies, the government will execute corporate restructuring on a regular basis. Public institutions will be no exception to this procedure. The government will institutionalize its continuing push for restructuring public institutions and establish self-regulating managerial system in public institutions.
The government predicted the Korean economy will grow around 5% annually next year. Electricity bills are likely to gain a mere 1% thanks to the rebound in both domestic demand and the global economy. In spite of possible deterioration in trade conditions, consumption is likely to increase around 4% due to income gains stemming from improvements in employment and wages.
Facility investment in and out of the country is expected to advance 11%. Also, investment conditions will improve thanks to recoveries in demand, corporate sentiments and stabilized exchange rates. Korea is likely to continue to post a current account surplus, with an expected surplus of 15 billion dollars which is down from last year's surplus, a little down from this year's surplus. Exports are expected to jump 13%, boosted by the global economic recovery while imports are likely to soar 21% because of rising oil prices and recovering domestic demand.
The number of Korean workers on payroll is expected to increase 200,000 on an annualized basis as employment conditions show signs of improvement. And, despite rising international oil prices, consumer prices will plateau at around 3% thanks to stabilized exchange rates and the continuation of deflation gap.
