No Change in Economic Operation of the Second Half of the Year

The government will officially amend the economic growth estimates of the year from an original 5% to 6% in a meeting with an economic minister, which will be held at the end of the month.

However, the government decides to follow an economy-invigorating policy of the current basic economic condition for the second half of the year, because an investment doesn’t get into its stride and there are many foreign anxiety causes although the economy has been recovered faster than the expectation

The concerned high-ranking official in the Ministry of Finance and Economy said on the 13th of the month, “The growth rate of the first quarter (Jan.~ Mar.) was estimated at 5.7% higher than the expected rate and the growth of the second quarter (Apr. ~ Jun.) is estimated to over 6%. We will increase the growth estimate of the year at 6% from 5%, as forecasted that the economy of the second half of the year will grow with a similar growth rate”.

However, he mentioned “A jump in real estate prices has settled down and the growth of household consumption is on decline by a curb of the government on a cash service withdrawal of credit cards. There is no sign of excessive economic boom. We strictly don’t need to amend the current basic economic condition in the second half of the year”.

The government announced the economy-invigorating measure such as extending the period for a reduction action of special excise tax on car from the end of June to end of August.

These policies of the government are based on a weakening pressure on price increase through decreasing an importing price with the increase on Won value (decreased exchange rate). The current growth comes to 6%, increased than the estimated growth rate.

Ministry of Finance and Economy estimates that the consumer price will increase to 2% in the first half and 3% in the second half of the year respectively as well as estimates that the consumer price will be within a range of 2~4% which is an annual price restraint, and in terms of a demand, the pressure on the price increase will come out at the end of the year.

However, if the export with 8~9% increase shows the two digit rate on increase in the second half of the year, the government may convert the economy invigoration into retrenchment for the basic economic condition.

The ministry will hold the meeting for Macroeconomic inspection with major Economic Research Institutes on the 14th of the month, and will finally inspect the economy. Then, the ministry will determine and announce the plan of the economic operation for the second half of the year in the meeting with an economic minister, which will be held in Office of the President (Cheong Wa Dae) at the end of the month.

Rae-Jeong Park ecopark@donga.com