News Room - Business/Economics

Posted on 06 Mar 2009

SKorea to go "all-out" to boost economy

South Korea's finance minister Thursday promised bold steps to revive domestic demand, implement swift corporate restructuring and save jobs in an "all-out" bid to spur the economy.

 

"The future belongs to whom survives this crisis," said Yoon Jeung-Hyun, describing the world downturn as "unprecedentedly far-reaching and fast worsening."

 

Yoon, who took office last month, also said the government would prioritise development of the service industry as its future growth engine.

 

The export-dominated economy, Asia's fourth largest, is on the verge of recession as overseas markets dry up.

 

It shrank 5.6 percent quarter-on-quarter in October-December, the worst showing since the East Asian financial crisis of 1998.

 

Yoon previously predicted the economy will shrink by two percent this year, and said the government will introduce a supplementary budget by the end of March.

 

In a speech to foreign correspondents Thursday the minister pledged "bold, swift and pre-emptive" fiscal and financial measures including supplementary budgets to boost sagging domestic demand.

 

The government would expand credit guarantees and supply adequate liquidity to make capital flow in the market. Small and medium-sized firms would be granted roll-overs on loans and guarantees maturing this year, and tax incentives would be offered to new homebuyers.

 

The government would "make all-out efforts to preserve and create jobs" by expanding fiscal and tax incentives to companies making job-sharing efforts. Yoon pledged an emergency welfare system for those hardest hit by the crisis.

 

The minister pledged swift corporate restructuring for construction firms, shipbuilders and others to eliminate market uncertainties.

 

Yoon said services should have been Korea's core industry but had been hobbled by over-regulation and conflicts of interests.

 

"The Korean government will remove restrictions on medical, education, tourism, and other high-value service industries, and nurture them as new growth engines for Korea's economic potentials."

 

"Green growth" industries should also be nurtured as future growth engines.

 

Yoon said Korea's restrictions on mortgage lending had curbed house price bubbles, and the corporate debt-to-equity ratio was one-quarter its level before the Asian financial crisis.

 

"These are the things that make Korea's economy strong and ready for a rebound," he said.