(2nd LD) Finance minister nominee vows to boost employment, consumption

(ATTN: UPDATES with more info in paras 2, 11-16)
SEOUL, Feb. 6 (Yonhap) -- South Korea's finance minister-designate said Friday
that he plans to strengthen the government's fiscal policy to create new jobs and
resuscitate falling domestic spending amid an economic downturn.
Yoon Jeung-hyun also said that the government will soon announce a revised target
for this year's economic growth, as sharp declines in exports and domestic
consumption seem likely to put its December estimate of 3 percent growth out of
reach. The government will also consider a supplementary budget to boost
weakening domestic demand, he added.
"Putting emphasis on job creation, I plan to take strong and proactive fiscal
measures to prompt domestic spending," Yoon said at his confirmation hearing at
the National Assembly.
Yoon, a former head of the Financial Supervisory Commission, was nominated by
President Lee Myung-bak in late January to replace the widely unpopular Kang
Man-soo.
Yoon said that he plans to release a revised forecast for economic growth after
taking office, noting that the previous estimate of 3 percent growth would no
longer be feasible.
His remarks came after the central bank's announcement earlier this month that
the Korean economy shrank 5.6 percent in the fourth quarter of 2008.
For the whole of 2008, the Korean economy grew 2.5 percent, down from a 5 percent
expansion in 2007. The central bank predicts the local economy will likely grow
just 2 percent this year.
Yoon, however, said he was confident that the country can pull out of the
economic difficulties, citing the nation's "past experience in overcoming crises
and the people's potential."
"We can definitely overcome the current difficulties," Yoon said. He stressed the
importance of coordinated efforts by market participants, citing "limitations" in
measures carried out solely by the government.
Yoon vowed to expand social safety nets and said he plans to expand tax benefits
and other support for companies that contribute to job creation.
He said the government will direct much-needed funds into the real economy by
calling for banks to accelerate corporate restructuring measures.
Local banks have been squeezed between government pressure to increase lending to
smaller firms while trying to jack up their falling capital adequacy ratio, a key
barometer of financial soundness. Banks are also reluctant to weed out troubled
corporate clients as part of the overhaul, fearing this would force them to set
aside more loan loss reserves and hurt their financial health.
"I share the view about the need to inject public funds into banks," Yoon said,
responding to a lawmaker's comment calling on the government to direct funds into
local banks to raise their capital adequacy ratio.
South Korean law currently prohibits the government from injecting funds into
lenders unless their capital adequacy ratio dips below 8 percent, a threshold for
judging a bank's insolvency.
The average capital adequacy ratio of 18 commercial and state banks came in at
10.86 percent as of the end of September, down 0.5 percentage point from three
months earlier.
Analysts took his remarks to mean the government could consider the public fund
injection as one of several contingency plans, but not a card to be used
immediately.
Yoon, meanwhile, downplayed allegations that his wife's purchase of farmland
south of Seoul years ago was made for speculative purposes.
"The purchase was not speculative. In my 35 years of public service, I would not
have been able to win the trust of my fellow workers if I had done such things,"
he said.
On a separate allegation that he failed to pay a gift tax after offering hundreds
of millions of won to his daughter to help her buy an expensive home in Seoul,
Yoon said that the situation involved his wife alone and that he was unaware of
it.
odissy@yna.co.kr
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