Next Gov`t Hints at Lower Growth Rate

The next administration is showing signs of lowering its economic growth target to around six percent, after having pledged seven percent in the presidential campaign.

This is because of uncertainty caused by the U.S. subprime mortgage crisis in global financial markets and the expected slowdown of the American economy. Adding to the cloudy picture are soaring international oil prices and inflation volatility.

Park Hyeong-jun, a commissioner of the presidential transition committee’s planning and coordination department, told a radio program Wednesday, “We don’t mean that we promise to raise the economic growth rate to seven percent this year. In 2008, we’ll come up with strategies to increase growth one percentage point from the current projections of 4.7 to five percent, as estimated by domestic economic think tanks.”

The comment seems based on the analysis that excessive state efforts to realize growth of seven percent could lead to inflationary pressure and current account and fiscal deficits.

In an interview, President-elect Lee Myung-bak said Tuesday, “Economic growth might not reach seven percent, but could slightly surpass six percent for the first ten months after my inauguration. It is possible, however, to get the rate to seven percent during my five-year term.”

Against this backdrop, his government’s target for job creation could fall below the 600,000 Lee originally suggested.

Finance and Economy Minister Kwon O-kyu also said Tuesday, “Risk is mounting that the economic growth rate will decrease due to aggravating economic conditions at home and abroad. Korea’s growth rate is expected to stay between 4.5 and 4.9 percent this year, as it did in 2007.”

parky@donga.com