Economic Outlook
Contains Good & Bad News

When the Ministry of Construction and Transportation recently announced creation of a new satellite city construction project designed to curb a surge in apartment prices, a flurry of a stir over real estate speculation and controversy over the government-ill-conceived real estate policies with exorbitant tax hikes was rekindled. This news was especially bad for prospective low-income house buyers while was considered good news by others.
The National Fiscal Act that will go into effect next year appears to come as a good news to our readers because the fiscal sector has become one of a few representative areas in which the participatory government has complemented reforms according to its original schedule. The enactment of the act, designed to shift fiscal policies from a control & input code to an autonomy and performance-based one under a long-term perspective, calls for, among others, the National Fiscal Management Plan, Top-down Budgeting, Performance Management System and Digital Budget and Accounting System.
It must be significant that the government has reformed its fiscal system of managing the national budget that has spiraled astronomically ― a 3,200-fold jump in 45 years from 45.9 billion won in 1961 to 147 trillion won in 2006. It may be interpreted as a welcome thing at a time when Korea needs to brace for future challenges and secure national competitiveness in an era of globalization and informatization as it is getting sandwiched by the U.S.-dominated global market and emerging markets of China and India.
Despite criticism over being politically-motivated, the government's long-term welfare plan, dubbed "Vision 2030,"is long overdue, given the stark reality that Korea faces a rapid decline in birth rate and an unprecedented pace of aging of the Korean population that will affect economic growth. It is timely that Korea is making preparations for the future with a goal of securing futuristic growth engines and ensuring sustainable development.
The government submitted to the parliament for approval the 2007 budget proposal scaled at 238.5 trillion won. The proposal calls for a 6.7 percent growth rate in nominal GDP and places priority on spending more in securing growth engines that will serve as "bread-winners"in the years to come and fortifying national defense.
Korea's future may hinge on how well the nation manages growth by overcoming uncertainties and curbing real estate prices. Proper distribution of welfare budgets on top of spending ion R&D and SOC investments may be also on the priority agenda in the minds of national policy-makers. The nation's future is depending on the government's managing this balancing act of handling growth while addressing the concern of society. If the government doesn't perform well, the outcome will be bad; lest's hope the government is up to the challenge and the outcome will be good for the future of Korea. nw

Publisher-President
Elizabeth M. Oh