Top economic officials demands active corporate investment to help boost growth

By Lim Chang-won Posted : April 25, 2019, 14:23 Updated : April 25, 2019, 14:23

Finance Minister Hong Nam-ki [Courtesy of Ministry of Economy and Finance]

SEOUL -- Alarmed by an unexpected contraction in gross domestic product (GDP) in the first quarter of this year, South Korea's top economic official called for active corporate investment, saying domestic and external conditions are worse than expected.

"It is necessary for the private sector, rather than the government, to actively seek to create investment and employment on its own," Finance Minister Hong Nam-ki told reporters on Thursday after chairing an emergency meeting of economy officials that followed a report by the central Bank of Korea.

Central bank data showed that South Korea's first-quarter GDP is projected to have shrunk 0.3 percent from the previous quarter. It marked the lowest growth since the fourth quarter of 2008 when Asia's fourth-largest economy contracted 3.3 percent on-quarter. The manufacturing sector posted a negative 2.4 percent growth from the previous quarter and the construction industry posted a 0.4 percent contraction.

At Thursday's meeting, Hong conceded that the economy is in a difficult situation, vowing to achieve the growth target of 2.6 to 2.7 percent by mobilizing "all policy means." "Domestic and external conditions are worse than expected, and the downside risk is also expanding."

The shipment of semiconductors, which account for 21 percent of South Korea's total exports, has dropped significantly due to quick adjustment in the semiconductor industry, while exports have been on the decline for the fourth straight month, coupled with sluggish private consumption and corporate investment, Hong said.

"We will continue to take deregulation measures to ensure that private investment takes place well, as an extra budget is not enough to restore economic vitality," Hong said.

Later in the day, the finance minister submitted a 6.7 trillion won ($5.78 billion) extra budget bill to the National Assembly. The supplementary budget is aimed at boosting South Korea's economic growth by 0.1 percentage point this year.

The central bank said that GDP expanded 1.8 percent on-year in the first three months of this year, the slowest growth since the third quarter of 2009. A week ago, the bank lowered its growth outlook to 2.5 percent for the year from 2.6 percent projected in January. South Korea's economy grew 3.1 percent in 2017 and 2.7 percent in 2018.

The manufacturing sector posted a negative 2.4 percent growth from the previous quarter and the construction industry posted a 0.4 percent contraction.
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