The South Korean economy will be able to return to its potential growth rate of around 3 percent next year in a fast turnaround from pandemic crisis that would close 2020 with a negative growth of 1.0 percent, the chief presidential aide on economy said.
“The recovery in the third quarter will continue in the fourth. A 3 percent growth is possible next year, putting the economy back on the pre-pandemic growth path,,” Lee Ho-seung, senior presidential secretary for economic affairs, said in an exclusive interview with Maeil Business Newspaper on Monday.
He attributed the country’s fast recovery to the strong manufacturing sector and aggressive bio and green drive that has led to a rebound in export.
Since Lee was appointed to the current position in June last year, the economy faced multiple whammies on top of pandemic, including Japan’s decision a month later to place curbs on Korea’s export of high-tech items that could have threatened the country’s chips and display industries. But the country has been well coping with it by enhancing the country’s own parts, component and materials sectors.
Asia’s fourth largest economy immediately sought stimulus measures to combat the pandemic-driven economic fallout and focused on grooming future-oriented industries such as bio-tech and environment-friendly industries.
“It’s rediscovery of Korea,” Lee said, posing a positive outlook on the Korean economy next year.
Lee was confident that the Korean New Deal will provide great opportunity for the Korean economy.
“Korea is not a country with the world’s top technology prowess like the United States or with the largest consumer market like China,” Lee said. “We should keep in check global trend and ride on it. Even in digital and green sector, we will only be able to survive if we ride on the market and seek opportunity.”
He forecast Korean companies will discover new opportunities for Korean companies in Green New Deal-related industries, in particular, especially under the new U.S. leadership, and the government will seek its role to support them, he said.
The country managed to secure platform business-based information technology (IT) and see bio exports grow more than 50 percent to over $10 billion, helping create new demand.
To rescue the country from the Covid-19 crisis, it is inevitable for the government to come up with aggressive fiscal expansion plan, Lee said.
“In times of an economic crisis, it would be more helpful in long-term national debt management to increase finance and raise gross domestic product growth rate despite rising debt,” Lee said. Korea’s national debt level remained at 38 to 39 percent to current GDP as of last year – fourth among 37 OECD countries and significantly lower than OECD average of 110 percent, the senior secretary added.
Korea’s fiscal deficit stretched to over 108 trillion won this year, doubling from a year ago following four increases to the budget.
According to a report released by the Ministry of Economy and Finance on Tuesday, Korea’s consolidated fiscal deficit – total income minus spending – stood at 80.5 trillion won by September.
Operational fiscal deficit – which is consolidated budget balance minus social security funds like pension and employment insurance – doubled from a year ago to an all-time high of 108.4 trillion won.
The sharp increase in fiscal deficit came after the government upped fiscal spending while total income fell.
Government debt ballooned to a record 800.3 trillion won, up more than 100 trillion won from 699 trillion won in the same period last year.
By Lim Sung-hyun and Lee Eun-joo
[? Pulse by Maeil Business News Korea & mk.co.kr, All rights reserved]?