[2020 National Audit] Government Also Says "Constraints on Economic Rebound"... V-Shaped Growth Out of Reach

October 7 National Assembly Planning and Finance Committee Audit

[Image source=Yonhap News]

[Asia Economy Reporter Jang Sehee] The Ministry of Economy and Finance diagnosed that the rebound in the domestic economy was limited due to the resurgence of the novel coronavirus infection (COVID-19). The risk of downside to the real economy is expected to increase further due to the COVID-19 resurgence triggered by Chuseok.

On the 7th, Hong Nam-ki, Deputy Prime Minister and Minister of Economy and Finance, reported these details during the National Assembly's Planning and Finance Committee audit held at the Government Complex Sejong.

Deputy Prime Minister Hong analyzed, "Due to the recent resurgence of COVID-19 and strengthened social distancing, the recovery trend centered on domestic demand is expected to be constrained," adding, "External risk factors such as the US-China trade conflict are also acting as instability factors for our economy." This is the first time the government has acknowledged that the economic rebound expected from the third quarter has practically been missed. The Bank of Korea and the Korea Development Institute (KDI) have also lowered their growth forecasts for this year to -1.3% and -1.1%, respectively.

The Ministry of Economy and Finance anticipated that while exports improved in the third quarter, the shock to domestic demand would intensify. Domestic demand showed a recovery trend due to policy effects such as the first emergency disaster relief fund in May and June, but uncertainty expanded after mid-August due to the resurgence of COVID-19.

In fact, the Consumer Confidence Index (CCSI) announced by the Bank of Korea on the 25th was 79.4, down 8.8 points from August. The Consumer Confidence Index is an indicator reflecting consumer sentiment about the economic situation; a value above 100 indicates optimism, while below 100 indicates pessimism. September exports rebounded for the first time in seven months, recording the highest level this year. This increase in exports is the first since COVID-19 and the highest in 23 months since October 2018.

The phenomenon of "the rich getting richer and the poor getting poorer" in the employment market is also expected to deepen. According to the August employment trend announced by Statistics Korea on the 9th of last month, temporary and daily workers decreased by 6.5% and 5.5%, respectively. The possibility of delayed recovery in some service sectors and the intensification of low birthrate and aging population were also cited as growth-limiting factors.

Accordingly, the government plans to boost domestic and foreign investment demand as the acceleration of economic activity stagnation is inevitable.

First, the government intends to proceed without disruption with private, private investment, and public investment projects totaling 100 trillion won. Among corporate investment projects worth a total of 25 trillion won, 11 projects worth 19.2 trillion won have been supported without disruption so far, and additional corporate investment projects worth 5.8 trillion won plus alpha are planned to be discovered. Furthermore, private investment projects worth about 15 trillion won are also planned to be promoted within this year. Public institutions will also advance 1 trillion won of this year's investment plans to this year and execute a total of 61.5 trillion won annually.

Active fiscal management will support vitality in the private sector. The Ministry of Economy and Finance announced that it will maintain an expansionary stance for next year's budget as well. It will promptly execute the first to fourth supplementary budgets and minimize budget non-utilization through tailored management of projects expected to have sluggish execution.

Meanwhile, the Ministry of Economy and Finance clearly expressed the government's commitment to protecting real demanders and eradicating speculative demand. Deputy Prime Minister Hong emphasized, "We will consistently pursue efforts to stabilize the real estate market through steady implementation of already announced policies and supervision of market-disturbing activities." The government plans to continuously monitor and respond to market conditions through the Real Estate Market Inspection Ministerial Meeting and the Real Estate Market Inspection Meeting.

This content was produced with the assistance of AI translation services.