Economic Stimulation
The Prime Minister and Minister of Strategy & Finance said on Sept. 19 that he would achieve a 6 percent growth rate next year in order to record a positive fiscal balance in the long term. The Deputy Prime Minister, who is staying in Australia for the G20 Financial Ministers and Central Bank Governors Meeting, added that Korea’s real growth rate would reach at least 4 percent in 2015 through some recovery in the third quarter of this year, although the percentage was 0.5 percent in Q2, 2014.
“Though the government debt-to-GDP ratio is estimated at 35.7 percent for next year, it is still just one-third of the OECD average,” he explained, continuing, “The role of finance is to stimulate the economy when economic conditions are bad.” He also stressed that the size of total household liabilities is not a major problem, if the ability for repayment is sufficient, despite his expansionary monetary policy that may have the side effect of increasing household debt.
In the meantime, he had interviews with Bloomberg and the Wall Street Journal in Australia on Sept. 21. “The Korean government is moving ahead with an aggressive fiscal policy, worth 41 trillion won [US$39 billion] in size, and the policy stance will continue to next year, which means a balance between fiscal and monetary matters,” he replied to the question about the necessity of an additional key rate cut. He continued, “The Bank of Korea will make a prudent decision based on its consensus with the fiscal authorities.” The remark can be interpreted as asking the central bank to additionally cut the key rate.