Facing continuing external challenges and structural problems next year, South Korea vowed to add speed to innovation and investment, determined to edge its way out of prolonged slow growth.

Pinning its hopes on the global economic uptrend, progress in the Sino-US tension and recovery of the chip business, the government forecast that Asia’s fourth-largest economy to achieve 2.4 per cent growth next year, while its inflation will recover to around one per cent, despite market scepticism.

“Looking back on our economy, we should say that 2019 has been a year of uncertainties. [The upcoming] 2020, on the other hand, offers us both opportunities and risks,” said Kim Yong-beom, first vice-minister of economy and finance, in an advance press briefing on the government’s economic policy directions.

As positive factors, the senior official cited the upturn in the global economy and the semiconductor industry and the latest phase-one trade deal between the US and China. The remaining negotiations of the Sino-US trade talks, however, are more likely to act as risk factors, along with the Brexit developments and China’s slower growth, Kim said.

The International Monetary Fund, in its revised economic outlook in October, forecast that the world economy will gain 3.4 per cent next year, up from the estimated three per cent this year.

The chip industry will see total profits climb 5.9 per cent, according to World Semiconductor Trade Statistics.

Seoul’s expansionary fiscal policy will be another boost for the domestic economic upturn next year, the ministry said. The fiscal spending total is expected to reach 512.3 trillion won ($440 billion) next year, up 9.1 per cent from this year.

In line with its forecast, the government suggested that the economy will expand 2.4 per cent year-on-year next year, up from the estimated two per cent this year. The inflation forecast was set at one per cent, up from the estimated 0.4 per cent for this year.

“The 2.4 per cent forecast [for next year] reflects our urgent policy drive to bail out of the slow growth phase which has weighed down upon our domestic economy, as well as the global economy this year,” Kim said.

Responding to scepticism that the government may end up lowering its initial forecast, as it did this year, the senior official pointed out to the recent developments between Washington and Beijing and improved global indexes. The government’s growth forecast for this year has dipped 0.7 percentage points throughout the year, down from the initial 2.7 per cent suggested late last year.

“Tangible figures such as the Purchasing Managers’ Index and the OECD Composite Leading Indicator have marked upturns in October-November, underpinning our anticipations for economic progress next year,” he said.

Also, as the Moon Jae-in government enters the second half of its five-year term, 2020 will mark an important turning point for the paradigm shift toward an innovative inclusive state, according to the ministry.

Under such awareness, the government unveiled the economic policy directions for next year, placing emphasis on three pillars – revitalising investment, securing new growth momentum, and expanding social protective measures for the vulnerable economic groups.

“We have placed top priority on recovering investment, which is the key factor in the economy’s rebounding momentum,” Kim said.

The government’s target is to discover and execute 100 trillion won worth of new investment projects in the private and public sectors combined.

THE KOREA HERALD/ASIA NEWS NETWORK