MOFE Minister: Korea's Economic Growth Forecast to Remain at 5% Level
- Dismisses IMF's downward prediction for this year

Minister of Finance and Economy Lee Hun-jai has reiterated a government projection that the domestic economy would grow at a 5 percent level, equivalent to its potential economic growth next year.

MOFE Minister Lee, also deputy prime minister, said during a meeting of reporters on Oct. 1, "The government cannot conceive Korea's gross domestic product dropping below the 5 percent growth rate for next year" Lee's remark came after the government had disputed the International Monetary Fund's (IMF) downward revision for its forecast for Korea's growth to below the global average.

IMF predicted that Korea's economy would grow 4.6 percent this year, 0.9 percentage points lower than its April forecast. The fund forecast next year's growth at 4 percent, quite lower than 5.3 percent predicted last April. However, IMF said the global economy would grow 5 percent this year, 0.3 percentage points higher than its previous outlook and 4.3 percent next year.

He said Korea has to create at least 500,000 jobs every year and if the nation's GDP growth drops to below the 5 percent level, the employment situation would worsen. Pointing out that the central government is responsible for increasing jobs and creating an amicable environment for economic activities, Deputy Prime Minister Lee said 500,000 jobs will have to be created next year, following 400,000 jobs for the year, and to this end, the government will employ policy measures to meet this goal.

The top economic policymaker noted that potential economic growth, now estimated at between 4.7 percent and 5.2 percent, would not change in the short term despite the current economic hardship.

Commenting IMF's revision of its 2004 economic outlook for Korea from 5.5 percent to 4.6 percent, DPM Lee said even though the projection was considered to be based on sufficient reasons, such a thing (grow rate standing below the 5 percent level) would not happen. He has been wondering about the reason the IMF lowered its economic outlook for Korea, with just three months away from the end of the year, adding that the sentiment for bashing Korea both abroad and at home gained ground and if the forecast were made earlier, it would seem more plausible.

Earlier, the Ministry of Finance and Economy (MOFE) and the Bank of Korea said they did not agree with the IMF's downward forecast for Korea's economic outlook for the year from 5.4 percent to 4.6 percent.

Lee Seung-woo, director-general of the Economic Policy Bureau at MOFE, told reporters on Sept. 30 that the IMF prediction was too pessimistic, adding that if IMF's prediction were on the mark, Korea's economic growth would have to slow down to 3.8 percent for the second half of the year, but the possibility was ruled out.

IMF and ADB were painting their forecasts for domestic facility investments and domestic demands too pessimistic, Lee said. Domestic private institutions were taking a negative attitude, given the fact that the overall economic situation is not favorable, he added. If the Dubai crude oil price would be kept at $37.8 per barrel or an average of $34 during the whole of the year, he said, Korea is forecast to achieve its growth target of 5 percent in consideration of the trends of current consumption, facility investments of exports.

In particular, Korea is predicted to maintain its monthly average exports at the $21 billion level by the end of the year, said Director-General Lee, adding that its overseas shipments for September were estimated at above the $20 billion unlike earlier fears of slowdown. The Ministry of Commerce, Industry, and Energy said on Oct. 1 that exports rose 23.5 percent on a year-on-year basis to $21 billion after climbing 29 percent in August.

MOFE also disputed ADB's earlier announcement of its adjusting its forecasts for Korea's economic growth for 2004 and 2005. The ADB lowered its prediction for its 2005 economic outlook for Korea to 3.6 percent from 5.2 percent in its previous projection, citing a slowdown in exports and slackening domestic demand.

Earlier this year, MOFE Minister Lee and senior ministry officials painted a rosy picture of the Korean economy, saying that an economic turnaround in the second half of the year would raise the growth for the whole of the year to around 6 percent, more than double last year's growth rate of 3.1 percent.

Korea has still been suffering from sluggish corporate and domestic consumption on top of such unexpected external factors as oil price hikes and slowdowns of Korea's two mainstay-trading partners the United States and China. International oil prices have recently hovered above the $50 per barrel because of oil supply disruptions, caused by political uncertainties in Nigeria and dwindling oil stockpiles in the United States, buffeted by the aftermath of the hurricane, and rising oil demands from global economic recovery.   nw