Disinflation, not Deflation
Deputy Prime Minster and Finance Minister Choi Kyung-hwan said on Feb. 5 that economic downside risks are still high due to the slowdown of the European and Chinese economies, although the global economy is signaling a gradual recovery led by the United States, and Korea is not free from these risks.
“We have tried hard for economic recovery, but the recession during the last quarter of 2014 has weakened our momentum, and we will continue coping with the situation by means of the reform of the public sector,” he said. He added, “Despite the difficulties, I’m optimistic about an annual growth of 3.8 percent for this year on the condition that the oil prices do not rebound, the Korea-China FTA goes on as scheduled, and our expansionary policy and interest rate cut work as intended.”
He also diagnosed the current state as not deflation but disinflation. “We are not in deflation yet, that is, a decrease in production and increase in unemployment with the prices themselves going down,” he mentioned, continuing, “Instead, we are currently trying to overcome inflation while the prices are not declining.”
He also remarked that the government would try to improve the quality of household debt throughout this year, while putting forward more efforts to help companies sharpen their competitive edge and continuing to monitor the volatility of the international financial market.