S. Korea to maintain expansionary policy: presidential aide

SEOUL, July 26 (Yonhap) -- South Korea will stand pat on its expansionary
policies to bolster the still-weak economy despite budding signs of recovery, a
senior official at the presidential office said Sunday.
To keep Asia's fourth-largest economy from going into a tailspin, the government
has been pushing to stimulate domestic demand through tax cuts, lower interest
rates and more fiscal spending, including a 28.4 trillion won (US$22.7 billion)
extra budget.
"Unless there are no special changes, the government will maintain its fiscal,
monetary, financial and tax policies," said the official at Cheong Wa Dae on
customary condition of anonymity.
"This is no time to rush to do something because there is no assurance that the
world economy will pick up," he said. "The current situation does not allow for
any change. We have to be prudent."
The remarks come as the Korea Development Institute, a state-run think tank, and
some politicians say the government should consider exiting its stimulus programs
in an effort to keep increased liquidity from stoking inflation down the road.
"An exit strategy should be mapped out, but now is not the time to talk about
such an issue," another presidential aide said.
On Saturday, Finance Minister Yoon Jeung-hyun, South Korea's economic czar, said
in a business forum that the government will maintain expansionary policies until
signs of an economic recovery shape up.
Propped up by massive stimulus measures and an eased fall in exports, the South
Korean economy is showing signs of escaping from its worst slump in more than 11
years.
The country's gross domestic product grew 0.1 percent in the first quarter of
this year from three months earlier, with the second-half quarterly growth rate
rising to 2.3 percent.
However, the economy is expected to shrink 1.5 percent for all of 2009, a
reversal from the 2.2 percent advance last year.
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