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S. Korean administration to maintain macroeconomic expansioinary policy stance in third year

Updated:2010-03-10 15:37:29

Kicking off his third year in office in March, South Korean President Lee Myung-bak is expected to keep his keen focus on the economic recovery, with his government continuing active policy support in macroeconomic policies.

Wrapping up the last two years devoted to restoring the nation' s economic health, the Lee Myung-bak administration is ready to continue leading the way toward a full-fledged recovery, keeping up its policy measures conducted during the past two years.


Hard struck by the global financial turmoil, sparked by the collapse of Lehman Brothers, just six months after the inauguration, the Lee regime has been placing top priority on weathering the financial crisis as soon as possible.

Amid deepening concerns over the instability in financial and foreign exchange markets, as well as in exporters, the government declared a virtual emergency government and launched a crisis management council meeting.

In line with the emergency moves, the presidential office set up an economic war-room at the presidential office to better monitor the economy.

The government unfolded various policy measures to fight the economic downturn, including fiscal stimulus packages and expansionary monetary policies.

Among the government's aggressive fiscal stimulus measures were tax cuts, a supplementary budget worth 28.4 trillion won (25 billion U.S. dollars), and frontloading of the fiscal expenditure.

The government also took a monetary approach to stabilize the financial sector, such as conducting rate cuts and fixing the key rate at an all-time low, expending the liquidity provision, and tying currency swap agreements with China, the United States, and Japan.

Moreover, the government sought to support the middle income group and bolster the job market by newly launching the micro- credit lending program and the youth internship project.

Driven by the government's timely, preemptive measures in various sectors, South Korea's economy regained growth momentum by the end of Lee Myung-bak's second year in term.

Seeing a positive growth rate of 0.2 percent and standing out as one of the fastest-recovering economies among OECD members, the South Korean government is obviously enjoying better-than-expected results from the last two years.


Holding a conference with foreign correspondents in Seoul on Tuesday, Finance Minister Yoon Jeung-hyun reiterated that his government will continue to take the leading role to keep the economy on track.

"The (South) Korean government will put priority on 'Gaining Traction for Self-sustained recovery' and 'Strengthening the Economic Fundamentals for Medium and Long-term Growth'," the minister told the press.

According to Minister Yoon, the third-year Lee Myung-bak regime will continue to unfold expansionary macroeconomic policies and frontload its expenditure as pre-scheduled.

Despite of concerns on excessive liquidity, the regime will also maintain its accommodative stance, the minister said, of which the side effects can be responded with sectoral policy measures, such as strengthened lending regulation.

Also, the government is committed to job creation through conducting both short-term and mid- and longer-term policies, Yoon said.

The South Korean government will keep its focus on welfare for mid- and low-income groups, providing them with support in need, and will push for new growth opportunities, such as green growth industries and the G-20 summit, Yoon added.

As shown in the stated policy directions, the government seems to keep its tight grip on the economy in an emergency mode, continuing its policy measures in line with those enacted during the past two years.

The policy directions reveal that the Lee Myung-bak regime is more concerned with vulnerable real economy than with excessive liquidity in the market, both of which seem to solidify the government's intention to keep up the existing strategies.

The government is also continuously looking at ongoing global jitters, such as state debt woes in Europe, which may at some point tumble the local economy.

While some experts are pointing out that an exit strategy should come at early date, what the government and the minister have been stressing do not hint that it may come as early as they think.

Although the government said to watch out for possibilities of inflation and real asset bubbles triggered by low interest rates, it has no intention to hike the key rate from the current record- low at least for the time being.

Finance Minister on Tuesday echoed the government's earlier stance, saying the country is not ready for a rate hike yet.

Its strong will to keep the rate under control is also revealed in Vice Finance Minister's attending the central bank's monetary policy meeting at which the key rate is settled.

An exit strategy, therefore, will not likely be the top priority task for the third-year Lee regime, which put heavier weight on the economy gaining solid ground.




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