hankyoreh

Gyeonggi

By Ryu Yi-geun

The government drastically lowered its projected 2012 economic growth to 3.7%, reflecting increasing uncertainties in the overseas economy with the continuation of the European financial crisis, but plans to maintain its current focus on financial austerity as a means of responding to the economic contraction.

The measures do not include any obvious efforts to support the working class, which stands to take the biggest hit from the reduced growth rate.

The government predicted Monday that the momentum for economic growth would drop off sharply, with experts dropping from a two-digit rate of increase this year to 8.4% for 2012. It was also predicted that the number of newly employed would fall sharply from 400 thousand this year to 280 thousand next year. The rate of increase in consumer prices was projected at 3.2% for the year.

According to the predictions, the growth rate for South Korean economy would be between 3% and 4%, lower than the potential growth rate for the past two years. This would mark the second time since the 1970s that growth rates fell below the 3% range for two years running since the years 2008 and 2009, when the global financial crisis hit. The figure amounts to half 7 percent of growth rate that Lee pledged during his presidential election campaign.

But the government stated that it plans to continue with its approach of austerity in financial policy. Ministry of Strategy and Finance Bahk Jae-wan said, “Unless we see an extremely difficult situation with the economic growth rate falling to between 1% and 3% in the first half of next year, we won't be seeing any revised supplementary budget.”

The 2012 budget submitted by the administration to the National Assembly in October was premised on a 4.5% economic growth rate, 0.8 percentage points higher than the government’s prediction Monday. This was based on a rate a 5.5% rate of increase in total expenditures for the year, four percentage points lower than the rate of increase for total income, with the goal of achieving a balanced budget a year early in 2013.

The National Assembly Budget Office criticized the austerity approach last month, saying, “While it is important to reestablish financial soundness in the medium term, this is not desirable policy in terms of the economic regulation function of finances.”

The government said it plans to respond to the economic contraction by administering 60% of its budget in the first half of 2012.

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