Government Comes Up With Stimulus Package

The government has started to review various economic stimulus measures such as lowering interest rates and forming additional budgeting plans to revive the current economy.

The government`s turnaround came after it decided that the current economic index was worse than expected and that this downward trend is likely to continue.

Vice President and Finance Minister Kim Jin-pyo attended the CEO Forum hosted by the Korea Productivity Center on April 30 at the Seoul Hilton Hotel and implied that he would like to lower interest rates.

“The current price level stands at 3 percent, but the call rate is as high as 4.25 percent,” he said. “I would manage the current financial policies in a flexible manner in case the economy gets worse.”

Bank of Korea`s President Park Seung said: “After analyzing the detrimental effect of SARS and the nuclear stand-off would have on our economy, we might have to lower call interest rates in May if the results prove worthwhile.”

Planning and Budget Minister Park Bong-hum said in a radio program: “It would be better to come up with an economic stimulus package in mid-May based on detailed economic performance results from the first quarter of this year. We are always considering possible changes to budgets according to economic status.”

“Korea would better off using expansive and macroeconomic policies including lowering interest rates to prepare for further economic downturn,” said David T Coe, deputy director of IMF Asia Pacific Office while visiting Korea to attend IMF`s annual meeting with the Korean government.

“We would like to try to minimize the side-effects of any economic stimulus package,” said Economic Policy Director Park Byung-won, regarding how much and when to lower interest rates and form additional budgeting plans. “Our goal is to show that the government is involved in reviving the economy.”

Related scholars in academia showed criticism of the government`s view. “It is true that various negative factors have a bad influence on the current economy, but it would be even worse if the government came up with uncertain economic policies while also dampening investments and consumer sentiment,” they said.

Kwang-Hyun Kim Kwu-Jin Lim kkh@donga.com mhjh22@donga.com