Government announces ‘2025 economic policy direction’
Low growth below ‘potential growth rate of 2.0%’… Stimulate the economy by mobilizing 18 trillion won of public resources
In the first half of the year, up to 70% of the people’s livelihood budget was invested
Acting President Choi: Supplementary budget preview: “Additional measures will be sought”
The government officially announced that Korea’s economic growth rate will be only 1.8% this year, and a cold wave of low growth in the ‘1% range’ will hit. This figure falls short of the potential growth rate (2.0%) and is lower than the Bank of Korea (1.9%) or the International Monetary Fund (IMF) forecast (2.0%). Amid the ‘perfect storm’ of negative news at home and abroad, the government has also left open the possibility of creating a supplementary budget.
On the 2nd, the government held an expanded ministerial meeting at the Seoul Government Complex presided over by Acting President Choi Sang-mok, Deputy Prime Minister and Minister of Strategy and Finance, and announced the ‘2025 Economic Policy Direction’ with the following contents. The government expressed concerns about uncertainty several times, pointing out, “In the new year, internal and external uncertainty, which has expanded more than ever before, is likely to have a significant impact on the growth path, financial and foreign exchange markets, and people’s livelihood conditions.”
The biggest reason why the government lowered the growth forecast of 2.2% announced in July of last year to 1.8%, down 0.4 percentage points, is sluggish exports. The export growth rate is expected to drop sharply from 8.2% last year to 1.5% this year. This is because the semiconductor industry, which led exports at an all-time high last year, is expected to slow down and China’s low-priced supply offensive is becoming more serious. In addition, it was analyzed that exports are likely to decline due to tariff risks following the inauguration of the second Donald Trump administration in the United States.
Domestic demand was expected to improve this year due to the easing of high inflation and high interest rates, but if political instability continues, the possibility of a recession cannot be ruled out. Kim Beom-seok, First Vice Minister of Strategy and Finance, explained, “(This economic forecast) is forecast on the premise that uncertainty due to martial law or impeachment can be managed to some extent.”
The government plans to actively pursue ‘recovery of the people’s livelihood and economy’ by releasing finances in a situation of all-round crisis. It was decided to mobilize public resources worth 18 trillion won and invest up to 70% of the 85 trillion won public livelihood budget in the first half of the year (January to June).
Acting President Choi said at the meeting, “This year, our economy is expected to face greater internal and external uncertainty than ever before due to the inauguration of the new U.S. government and the domestic political situation,” and added, “We will reexamine the overall economic conditions during the first quarter and make additional decisions if necessary.” “We will seek ways to strengthen the economy,” he said, hinting at the possibility of a supplementary budget.
Sejong = Reporter Soon-gu Jeong [email protected]
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