(2nd LD) S. Korea will strive for 3 pct growth in 2009

SEOUL, Dec. 16 (Yonhap) -- The South Korean government said Tuesday that it will strive for 3 percent economic growth in 2009 despite the worldwide slump in consumption, business investment and employment conditions.

In its economic management plan, the Ministry of Strategy and Finance said
full-fledged stimulus programs including deregulation, tax cuts and increased
state spending should help sustain growth in the new year. It said up to 60
percent of next year's fiscal spending will be spent in the first six months.
The target is higher than the 2 percent gross domestic product (GDP) growth
forecast by the Bank of Korea (BOK) last week, but lower than the 4 percent
growth projected by the government earlier in the year.
"The growth rate is the figure that Seoul wants to reach, not an actual
prediction of growth," said Yook Dong-han, head of the ministry's economic policy
bureau.
He hinted that GDP numbers released by the central bank may be closer to actual
growth, but stressed it is the role of the government to set high goals.
GDP growth of 2 percent would be the lowest since the 6.9 percent contraction
tallied in 1998 as the country struggled to cope with the Asian financial crisis.
Growth in the 3-percent range will be on par with 3.1 percent growth reached in
2003.
The official added that 2009 promises to be a very tough year for the country and
the rest of the world, and said that earlier predictions about various incentives
and large-scale state projects contributing 1 percentage point to growth may have
to be reassessed due to the unexpected sharp loss of economic buoyancy in the
past few months.
"Even if the exact same policies (as proposed) are carried out, the effect can be
different if overall economic health has deteriorated," Yook said.
The director general said that while Seoul had officially maintained that this
year's growth will surpass the 4 percent mark, a sharp drop in production,
exports and consumption from September has caused predictions to fall to 3.6
percent. In 2007, the South Korean economy grew by a solid 5 percent.
The official also said the country's current account surplus could reach US$10
billion won in 2009 from an estimated $6 billion deficit this year, with consumer
prices gaining around 3 percent from 4.7 percent this year.
On employment, the ministry's report said that Seoul is aiming to create 100,000
new jobs in the new year, but warned that the exact target is meaningless since
the employment market will likely freeze up.
"The government respects the BOKs prediction of 40,000 new jobs being created in
2009," Yook said, and did not refute the possibility that there may be negative
growth in the job market in the first half as the weak economy triggers layoffs.
He said unemployment may edge up to 3-4 percent in the new year from around 3.2
percent for 2008.
The numbers forecast are well shy of the 200,000-300,000 new positions that the
Lee Myung-bak administration said should be created in the coming years to ensure
sustainable growth and to absorb the annual influx of job seekers.
On crude oil prices that wreaked havoc on the country's trade balance this year,
the ministry said the average for next year should hover around US$60 per barrel,
down sharply from the record high of $140 reached in July.
A drop in crude prices can help improve the balance of trade, which could exceed
$10 billion by the end of the year.
Seoul will also allow the state-run Korea Investment Corp. to invest in overseas
resource development efforts that require a considerable amount of money and
extended periods of time to bear fruit.
To help stabilize the exchange rate, which has fluctuated violently this year,
the government will set aside 20.6 trillion won (US$15.2 billion) in foreign
exchange stabilization bonds.
The country's top economic policymaking body, meanwhile, said experience has
shown that an economic slump caused by a liquidity crunch requires three to four
years to correct, and since the U.S. sub-prime mortgage debacle started
materializing last year, it may not be until 2010 or 2011 before overall economic
conditions return to normal.
It added that if concerted efforts to revive the global economy begin to take
effect, signs of recovery could materialize starting late next year.
In regard to tax cuts, the country's top economic policymaking body said it will
scrap the controversial comprehensive real estate holding tax currently levied on
people who own expensive properties, merging it instead with regular property
tax.
The 2009 management plan, moreover, calls for reducing the burden of transfer tax
for business properties that have not been put to use. The clause introduced in
the last administration is designed to clamp down on property prices, although
companies claimed such a system made it impossible to sell such holdings and used
it to push forward restructuring efforts.
Other sources in the ministry said that while public restructuring plans to merge
and sell state-run companies are to be completed in the first half of 2009,
current conditions may affect the timetable.
An insider said that it may be physically impossible to privatize the state-run
Korean Development Bank before June of next year.
yonngong@yna.co.kr