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94202
Thu, 12/10/2009 - 16:25
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(News Focus) Economy rebounds but remains exposed to outside factors

By Koh Byung-joon
SEOUL, Dec. 10 (Yonhap) -- In stark contrast with the freefall witnessed in
markets after the global economy stepped off a cliff late last year, the
government is painting an increasingly rosy picture of the economy's prospects,
saying that almost all indicators will rebound in 2010 from record lows suffered
as a result of the financial crisis.

But policymakers remain cautious about voicing optimism for a full-blown recovery
as the nation's export-driven economy remains vulnerable to outside shocks,
underlining the need to keep an expansionary macroeconomic policy stance and
stimulate domestic demand in order to cushion the impact of external turbulence
in the future.
"The crisis laid bare the limit of the existing growth paradigm and the
structural weaknesses in our economy," the ministry said in a report. "With the
service sector development still insufficient, domestic demand and job-creation
remain fragile, leaving the economy susceptible to outside shocks ... We need to
nurture the domestic demand base."
The policy direction is part of the annual economic management plan unveiled by
the Ministry of Strategy and Finance on Thursday. The ministry forecast that the
economy will avoid negative growth this year by expanding 0.2 percent before
rising 5 percent next year, the latest in a series of optimistic forecasts for
Asia's fourth-largest economy.
In the economic management plan, the ministry said that it focused mainly on two
things: the "successful" survival of an economic crisis and laying the groundwork
for future growth.
Job creation topped the list, as the government wants to increase domestic demand
in the face of lingering uncertainty in global markets, which bodes ill for its
export-oriented economy.
South Korea has been losing jobs this year as companies trim their recruitment
for fear that business conditions could deteriorate. In May, job losses rose to a
10-year high of 219,000, but thanks to government efforts to create jobs in the
public sector by providing temporary work. The government also plans to provide
such public-sector jobs, mostly temporary, next year as well.
In a related move to tackle the frozen labor market, the ministry said the
government will establish a so-called "national employment strategy meeting"
every month where experts from the education, labor and industry and welfare
sectors can discuss ways to create jobs. The meeting will be chaired by President
Lee Myung-bak.
Based on such efforts, the government projected it could create 200,000 jobs next
year, compared with this year when about 70,000 jobs are expected to be
eliminated from payrolls.
"The government will continue to provide jobs in the public sector to help offer
more working positions but the number will be smaller than this year," said Yoon
Jong-won, head of the finance ministry's economic policy bureau, during his
briefing on the management plan. "The job creation target can be met when the
private sector hires workers in the range of upper 200,000 or lower 300,000."
The projection will not be met without the help from the private sector, but
companies remain reluctant to open their wallets amid lingering business
uncertainties at home and abroad.
"Lingering uncertainties in the financial sector, however, are expected to cause
major economic players including households, companies and financial firms to
take a conservative approach. It seems unlikely there will be a fast recovery in
consumption and investment," he added.
The government, in response, will craft countermeasures aimed at easing
regulations and lowering industry barriers that hamper the start of new
businesses, in an effort to encourage entrepreneurship and improve the overall
investment environment.
More incentives will be given to new growth engines including green industries,
seen as leading the nation's future, while fiscal support will also be considered
to bolster investment in research and development.
For the development of the nation's service sector, regarded as being more
effective in generating jobs, the ministry said it will reduce regulations to
make it easier to establish foreign schools and foreign hospitals in economic
free zones.
The ministry added that it will draw up measures to help support tourism and
leisure industries. This is in line with the government's recent move to build
dozens of marinas in the nation's southern coastal area.
Still, the government's growth projection for next year depends heavily on
outside factors, the ministry said. It said it will keep its expansionary policy
stance "for the time being" to assure a sustained recovery and consider taking
back stimulus measures depending on unfolding economic and job market conditions.
"The global economy is expected to continue its steady recovery with Asian
countries such as China and India to make a relatively faster rebound. However,
there are some causes for concern, such as instability in the international
financial market and uncertainties in relation with the global economic
recovery," the ministry said.
"It is likely that the Korean economy will attain growth on par with its
potential in the middle of next year, but it could be exposed to conditions in
advanced countries, oil prices and other external factors.
kokobj@yna.co.kr
(END)

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