Deputy Prime Minister and Minister of Economy and Finance Choo Kyung-ho will participate in the 2022 Annual Meetings of the International Monetary Fund (IMF) and the World Bank Group (WBG), slated for Oct. 10 through Oct. 16, in the IMF and World Bank Group headquarters, in Washington DC.
Deputy Prime Minister Choo will head a Korean delegation to the annual meetings.
The delegation includes the governor of the Bank of Korea and heads and representatives of commercial banks, including Shinhan Financial Group, KB Kookmin Financial Group, Hana Financial Group, NH Financial Group, Woori Bank, Korea Development Bank, IBK, and Korea Eximbank as well as representatives of other financial institutions and the financial industry, including the Korea Financial Investment Association.
The Annual Meetings of the International Monetary Fund (IMF) and the Board of Governors of the World Bank Group (WBG) bring together central bankers, ministers of finance and development, private sector executives, representatives from civil society organizations and academics to discuss issues of global concern, including the world economic outlook, poverty eradication, economic development, and aid effectiveness.
Also featured are seminars, regional briefings, press conferences, and many other events focused on the global economy, international development, and the world’s financial system.
Gov’t Works Improve Preliminary Feasibility Study System
Deputy Prime Minister Choo Kyung-ho presided over the Emergency Ministerial Meeting on Economic Affairs on Sept. 13 to discuss measures to introduce fiscal rules and improve the preliminary feasibility study system. The following is a summary of DPM Choo’s opening remarks.
Amid continued high prices, uncertainty in the financial and FX market, and concerns about the possibility of an economic slowdown, are rising.
Against this backdrop, the government should maintain fiscal soundness to manage national finances responsibly for the next generation.
To that end, the government has devised the two following measures to maintain fiscal soundness after the 2023 budget proposal announced on August 30.
To maintain fiscal soundness, the government needs to introduce and legislate fiscal rules that control and manage fiscal aggregates, which is implemented in most OECD countries.
The government has made its utmost efforts to design simple but legally binding fiscal rules through discussions and advice from many experts and will also work hard to legislate the fiscal rules during this year’s regular sessions of the National Assembly.
- Choose the managed fiscal balance as a standard of fiscal rules over the consolidated fiscal balance and the deficit of the managed fiscal balance does not go beyond three percent to GDP and shall be reduced to two percent to GDP in case that the government debt exceeds 60 percent to GDP.
- Grant the temporary exemption of applying fiscal rules in case of exceptional situations such as wars, national disasters, and economic downturns.
- Establish a legal basis for managing fiscal rules by devising fiscal rule management standards under the National Finance Act and apply the fiscal rules for designing the 2024 budget proposal as the first case after its enactment.
Concerns about the preliminary feasibility study system are being raised because of its lax management and a failure to adapt to new changes.
To address this problem, the government will ensure that the system could fully serve as a gatekeeper to national finances and commit to making the system process faster, more flexible and more transparent.
- Specify and tighten the requirements for exemption and expand implementation of the adequacy review on projects that were granted exemption.
- Tighten the verification process of large-scale welfare projects by introducing a new procedure that conducts a pilot project first and review whether to implement the main project based on the evaluation of the pilot project results.
- Reduces a period for selecting and inspecting the projects that require preliminary feasibility studies to 7 months from the current 11 months with a view to timely implementing urgent projects.
- Raise the amount standard for SOC and R&D projects that require preliminary feasibility studies to 100 billion won from the current 50 billion won.
- Utilize map visualization to provide the public with information about the progress of preliminary feasibility studies by project type and region to increase the transparency.
The meeting was joined by ministers from related ministries, including Ministry of Science and ICT, Ministry of Agriculture, Food, and Rural Affairs, Ministry of Oceans and Fisheries, Ministry of SMEs and Startups, the Office for Government Policy Coordination, and the Chairman of the Financial Services Commission (FSC).
OECD Ups Korea's Growth Forecast This Year to 2.8%
The Korean economy is forecast to grow 2.8 percent this year on the back of the recovery of the private sector’s consumption despite sagging investments, but economic growth for 2023 will likely decline to 2.3 percent due to slowing export growth, the Korean Development Institute predicted in May.
The service sector’s consumption will lead the recovery of the private sector’s consumption for this year, reflecting fiscal support amid the lifting of social distancing guidelines, and a solid recovery is forecast for next year.
The Organization for Economic Cooperation and Development (OECD) said on Sept. 19 the Korean economy will see a 2.8 percent growth this year on the back of the overcoming of the COVID pandemic and the recovery of consumption, revising upward 0.1 percentage point over its June forecast. OECD readjusted upward the nation’s inflation growth rate from the previous 4.8 percent to 5.2 percent.
According to the Ministry of Economy and Finance, in a report on the 2022 Korean economy issued on Sept. 19, OECD raised Korea growth to 2.8 percent, up 0.1 percentage point from the previous 2.7 percent.
The growth rate was higher than 2.6 percent and 2.3 percent growth the Bank of Korea and IMF predicted in August and July, respectively.
OECD said the Korean economy had effectively overcome a crisis, caused by the COVID pandemic and it is forecast to grow something like this on the back of the recovery of consumption following the easing of countermeasures against the pandemic.
OECD said the Korean would see a 2.2 percent growth for next year, down 0.3 percentage points from the previous prediction.
Services Up, Manufacturing, Retail Sales, and Construction Investment are Down
Services rose in July while manufacturing, retail sales, facilities and construction investment declined. Employment continued to increase in August and consumer prices rose at a slower pace.
Industrial production decreased by 0.1 percent from the previous month in July as services (up 0.3%, m-o-m and up 4.7%, y-o-y) went up but manufacturing (down 1.3%, m-o-m and up 1.5%, y-o-y) declined.
Retail sales (down 0.3%, m-o-m and down 1.9%, y-o-y), facilities investment (down 3.2%, m-o-m and down 2.2%, y-o-y) and construction investment (down 2.5%, m-o-m and up 2.0%, y-o-y) all declined in July.
Exports rose by 6.6 percent year-on-year in August, led by petroleum products and cars. Average daily exports increased by 2.2 percent from a year ago to $2.36 billion in August 2022 from $2.31 billion in August 2021.
The consumer sentiment index (CSI) increased by 2.8 points in August to 88.8 from the previous month. The business survey index (BSI) for the entire sector also went up by 1 point to 81, and the BSI outlook for September 2022 rose by 3 points to 82.
The cyclical indicator of the coincident composite index for July increased by 0.5 points and the cyclical indicator of the leading composite index fell by 0.3 points.
The economy added 807,000 jobs year-on-year in August and the unemployment rate fell by 0.5 percentage points from a year ago to 2.1 percent.
The consumer prices grew by 5.7 percent year-on-year in August due to a slower increase in petroleum prices and the core inflation rose by 4.4 percent.
In August, Korean treasury yields rose, the won weakened, and stock prices returned to decline after increases at the beginning of the month as concerns regarding the US tightening policy were re-emphasized.
Housing prices decline is faster in August (-0.08% → -0.29%, m-o-m), and prices of Jeonse (lump-sum deposits with no monthly payments) also saw a faster decline (-0.08% → -0.28%, m-o-m).
While the economy has continued to improve gradually due to recovery in employment and in-person service industries, amid continued high inflation caused by external factors, there are concerns of economic slowdown such as a drag on export recovery in the future.
Internationally, with global inflationary pressure continuously rising, financial market volatility and global economic downside risks persist due to major economies’ rapid interest rate increases, China’s lockdown measures and the uncertainty of energy supply and demand.
The government will make its utmost efforts to boost the private economy, strengthen risk management efforts and push ahead with structural reforms for each sector as well as to take comprehensive measures to stabilize people’s livelihood following the Chuseok holiday by taming prices and helping recover from the devastation caused by typhoons.
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