[News ANALYSIS] Korea to focus on exit, jobs

Korea is officially starting an exit strategy, the government proclaimed Thursday in its economic management plan for the second half of the year. 

Unwinding crisis-fighting measures in such a way that does not hurt economic recovery is already a tough task to pull off. But the government said that it will also focus on creating jobs and improving the livelihoods of ordinary people, many of whom are still in economic pains. 

“Despite remarkable improvements in economic indicators, ordinary people are yet to feel the recovery in their everyday life,” Finance Minister Yoon Jeung-hyun said. 

“Improving the public’s livelihood is one of our top policy priorities. We will strive to create jobs, by supporting private-sector employment and enhancing public job projects,” he added. 

The government predicted that the country’s gross domestic product will expand 5.8 percent in 2010, significantly higher than its December forecast of 5 percent gain. 

It also raised the job creation target to 300,000 from 250,000. 

As the economy shows a sharp rebound, the government will gradually switch its macroeconomic management back to normal mode, scaling back or terminating economic support programs which were introduced to fight a sharp economic contraction in late 2008. 

In implementing an exit strategy, the key areas of focus are interest rates and fiscal spending. 

Finance Minister Yoon Jeung-hyun addresses a news conference on economic policies for the second half of the year at the government’s complex in Gwacheon on Thursday. Park Hae-mook/The Korea Herald

“As for interest rates, economic growth in the first and second quarters (of the year) should be taken into consideration,” Yoon said. The second-quarter GDP data will be released in late July. 

“Another important factor is how commodity and asset prices will move, which will show the risk of inflation,” he added. 

Korea’s benchmark interest rate has been kept at a record-low level since February 2009. Expectations run high that the central bank will start raising the key rate as early as in August in order to stave off inflation. 

The government plans to scale back public expenditures in the second half in order to secure fiscal soundness after aggressive stimulus spending during the crisis. 

It plans to spend 108 trillion won ($90 billion) during the July-December period, compared to the first-half budget of 163 trillion won.