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Korea’s Macroeconomic Outlook
and Policy Development
Ministry of Strategy and Finance
2014. 3. 13
2014 FKCCI
Economic Forecasts
1
CONTENTS
Ⅰ
Ⅱ Macroeconomic Outlook
Policy DevelopmentⅢ
The Three-year Plan for Economic Innovation
Recent Economic Conditions
IV
2
Recent Economic Conditions
1. Domestic Economic Condition
2. Global Economic Condition
I
3. Structural Condition
1. Domestic Economic Condition
3
I Recent Economic Conditions
’13 4/4 ’13 4/4
’13 4/4
4.8
2.8
0.70.4
54.1
32.4
25.7
34.2
42.1
2. Global Economic Condition
4
I Recent Economic Conditions
Growth slowed due to economic
cyclical and structural issues
Despite private-led recovery,
uncertainties remain about QE
tapering and debt ceiling
US
Emerging
economies
Growth slower than past
due to a shift in growth
strategy
China
The expansionary fiscal and monetary
policies led to economic recovery but
facing consumption tax increase and lack
of reform
Japan
Showing signs of gradual
recovery, but facing sluggish
job market
EU
3. Structural Condition
5
I Recent Economic Conditions
Amid overall sluggish productivity growth, the productivity of
services particularly continued to stagnate
Inefficient public sector undermined national competitiveness
Structural changes are underway
-Low birth, aging population, changing trade environment
-climate change, the depletion of resources
All Industries
Manufacturing
Services
Ranking
Basic Factors
Institutional Factors**
Market Efficiency
Corporate Innovation &
Maturity
* Among 148 countries
** Government regulations, efficiency of government
expenditure and law systems, transparency of policy making
6
II Macroeconomic Outlook
1. Economic Growth
2. Employment
3. Consumer Price
4. Export, Import, and Balance on Current Account
7
1. Economic Growth
II Economic Outlook
7
Real GDP Growth
Consumption of
Common People
(‘13) 2.8% → (‘14) 3.9%
Improvement in both export and domestic
consumption
Plant and Equipment
Investment
Construction
Investment
(‘13) 1.9% → (‘14) 3.3%
Stabilized price, improvement in real purchasing
power by the increase in employment
(‘13) △1.6% → (‘14) 6.2%
Increase in investment demand, government
investment activation policy taking effect
(‘13) 7.0% → (‘14) 2.0%
Increase in non-residential construction but slump
in housing and engineering construction expected
2. Employment
II Economic Outlook
Employment
Conditions
Economic
recovery, implemen
tation of the
Roadmap towards
the 70%
Employment Rate
2014
Forecast
(‘13) 380,000
↓
(‘14) 450,000
9
3. Consumer Price
II Economic Outlook
Price Conditions
Ascending pressure on demand side by economic
recovery but price maintain stabilized by
stabilized raw material price
Sectoral Conditions
Normal year level of price rise expected in
agricultural, stockbreeding, and fishery products
Increase of variability in international oil price is
a unstable factor in industrial goods
2014 Forecast Inflation: (‘13) 1.3% → (‘14) 2.3% ↑
10
4. Export, Import, and Balance on Current Account
II Economic Outlook
Export
&
Import
Export growth rate: (‘13) 2.5% → (‘14) 6.4%
Import growth rate: (‘13) △0.3% → (‘14) 9.0%
Balance on
Current Account
(‘13) 70 billion USD → (‘14) 49 billion USD surplus
Goods balance: 45 billion USD surplus,
non-goods balance: 4 billion USD surplus
11
Policy Direction
1. Boost Domestic Demand
2. Create Jobs & Stabilizing Public Livelihoods
III
3. Improve Economic Fundamentals
4. Strengthen Policy Effectiveness
1. Boost Domestic Demand (1/2)
12
III Policy Development
Promote corporate investment by easing
regulations
Stimulate
Investment and
Consumption Revitalize regional economy
Boost service industry
Improve consumption condition
Normalize
housing market
Stabilize rental price and monthly rent market
Support housing purchase
Adapt to changes in housing market
1. Boost Domestic Demand (2/2)
13
III Policy Development
Flexible fiscal policies to sustain momentum
Continue
Expansionary
Macroeconomic
Policies Foreign Exchange policy : Prepare against
rising volatility in FX
Monetary and credit policy to achieve strong
economic recovery
Strengthen
Risk
Management
External Risk: Strengthen monitoring on
capital flows, Secure sufficient policy capacity
Internal Risk: Ensure soft landing of household
debt, Swift corporate restructuring
14
Creating Jobs for Youth and
Women
Stabilizing Public
Livelihoods
2. Creating Jobs & Stabilizing Public Livelihoods
Stabilizeprice of necessities
Ease the burden of living expenses
Bolster the middle class to provide
more opportunityfor climbingup
the social ladder
III Policy Development
15
Reform of Public Sector Economic Democratization
III Policy Development
3. Improving Economic Fundamentals
Export & Overseas Expansion Creative Economy
16
4. Strengthen Policy Effectiveness
Wide public access to fiscal & public sector
information
Information access will be more easy and
convenient
Cooperation
Openness
Sharing
Encourage ministerial collaboration
Develop public-private cooperation models
Regularly review policy implementation
Establish an economic policy portal
Implement ,
Monitor,
Strengthen Policies
III Policy Development
17
IV The Three-year Plan for Economic Innovation
1. Overview
2. Economy with Strong Fundamentals
3. Economy with Dynamic Innovation
4. Economy with a Balance between Exports
and Domestic Demand
1. Overview
18
IV The Three-year Plan
Accomplishing an era of happiness for the peopleObjective
3 Major
Strategies
Economy with
Strong Fundamentals
Economy with
Dynamic Innovation
Economy with a Balance
between Exports and
Domestic Demand
9+1
Tasks
Reform public
sector
Build a market
economy based on
principles
Establish a strong
social safety net
Develop creative
industries
Invest
for the future
Make inroads into
overseas market
Improve the
investment
environment
Strengthen
domestic demand
Encourage the labour
force participation of
youth and women
Prepare reunification
Strategy 1. Economy with Strong Fundamentals
19
IV The Three-year Plan
Reform Public
Sector
Build a Market
Economy based on
Principles
Establish a Strong
Social Safety Net
Normalize public institutions
Apply the principle of competition to public
institutions
Reform finance
Settle fair trade and protect consumer’s right
Labor-management relations in
communication and compromise
Strengthen safety net for the people suffering
during the economic innovation process
Escape poverty through work
Strategy 2. Economy with Dynamic Innovation
20
IV The Three-year Plan
Develop Creative
Industries
Invest
for the Future
Make Inroads into
Overseas Market
Establish 17 creative economic innovation centres
On-line “creative economy towns”
Expand R&D and human capital
Respond to issues on climate, environment,
and energy
Expand strategic FTAs
Export overseas construction, plant, and
contents
Strategy 3. Economy with a Balance between Exports and Domestic Demand
21
IV The Three-year Plan
Improve the
Investment
Environment
Strengthen
Domestic Demand
Encourage the Labour
Force Participation of
Youth and Women
Manage households debt
Normalize housing sales market
Stabilize lease market
Establish regulatory reform system
Promote promising service industry
Vitalize local economy
Addressing difficulties in employment (process)
of youth
Preventing severance of women career path
THANK YOU
22

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Economic Forecasts 2014 by FKCCI - Korea's Macroeconomic Outlook and Policy Development

  • 1. Korea’s Macroeconomic Outlook and Policy Development Ministry of Strategy and Finance 2014. 3. 13 2014 FKCCI Economic Forecasts
  • 2. 1 CONTENTS Ⅰ Ⅱ Macroeconomic Outlook Policy DevelopmentⅢ The Three-year Plan for Economic Innovation Recent Economic Conditions IV
  • 3. 2 Recent Economic Conditions 1. Domestic Economic Condition 2. Global Economic Condition I 3. Structural Condition
  • 4. 1. Domestic Economic Condition 3 I Recent Economic Conditions ’13 4/4 ’13 4/4 ’13 4/4 4.8 2.8 0.70.4 54.1 32.4 25.7 34.2 42.1
  • 5. 2. Global Economic Condition 4 I Recent Economic Conditions Growth slowed due to economic cyclical and structural issues Despite private-led recovery, uncertainties remain about QE tapering and debt ceiling US Emerging economies Growth slower than past due to a shift in growth strategy China The expansionary fiscal and monetary policies led to economic recovery but facing consumption tax increase and lack of reform Japan Showing signs of gradual recovery, but facing sluggish job market EU
  • 6. 3. Structural Condition 5 I Recent Economic Conditions Amid overall sluggish productivity growth, the productivity of services particularly continued to stagnate Inefficient public sector undermined national competitiveness Structural changes are underway -Low birth, aging population, changing trade environment -climate change, the depletion of resources All Industries Manufacturing Services Ranking Basic Factors Institutional Factors** Market Efficiency Corporate Innovation & Maturity * Among 148 countries ** Government regulations, efficiency of government expenditure and law systems, transparency of policy making
  • 7. 6 II Macroeconomic Outlook 1. Economic Growth 2. Employment 3. Consumer Price 4. Export, Import, and Balance on Current Account
  • 8. 7 1. Economic Growth II Economic Outlook 7 Real GDP Growth Consumption of Common People (‘13) 2.8% → (‘14) 3.9% Improvement in both export and domestic consumption Plant and Equipment Investment Construction Investment (‘13) 1.9% → (‘14) 3.3% Stabilized price, improvement in real purchasing power by the increase in employment (‘13) △1.6% → (‘14) 6.2% Increase in investment demand, government investment activation policy taking effect (‘13) 7.0% → (‘14) 2.0% Increase in non-residential construction but slump in housing and engineering construction expected
  • 9. 2. Employment II Economic Outlook Employment Conditions Economic recovery, implemen tation of the Roadmap towards the 70% Employment Rate 2014 Forecast (‘13) 380,000 ↓ (‘14) 450,000
  • 10. 9 3. Consumer Price II Economic Outlook Price Conditions Ascending pressure on demand side by economic recovery but price maintain stabilized by stabilized raw material price Sectoral Conditions Normal year level of price rise expected in agricultural, stockbreeding, and fishery products Increase of variability in international oil price is a unstable factor in industrial goods 2014 Forecast Inflation: (‘13) 1.3% → (‘14) 2.3% ↑
  • 11. 10 4. Export, Import, and Balance on Current Account II Economic Outlook Export & Import Export growth rate: (‘13) 2.5% → (‘14) 6.4% Import growth rate: (‘13) △0.3% → (‘14) 9.0% Balance on Current Account (‘13) 70 billion USD → (‘14) 49 billion USD surplus Goods balance: 45 billion USD surplus, non-goods balance: 4 billion USD surplus
  • 12. 11 Policy Direction 1. Boost Domestic Demand 2. Create Jobs & Stabilizing Public Livelihoods III 3. Improve Economic Fundamentals 4. Strengthen Policy Effectiveness
  • 13. 1. Boost Domestic Demand (1/2) 12 III Policy Development Promote corporate investment by easing regulations Stimulate Investment and Consumption Revitalize regional economy Boost service industry Improve consumption condition Normalize housing market Stabilize rental price and monthly rent market Support housing purchase Adapt to changes in housing market
  • 14. 1. Boost Domestic Demand (2/2) 13 III Policy Development Flexible fiscal policies to sustain momentum Continue Expansionary Macroeconomic Policies Foreign Exchange policy : Prepare against rising volatility in FX Monetary and credit policy to achieve strong economic recovery Strengthen Risk Management External Risk: Strengthen monitoring on capital flows, Secure sufficient policy capacity Internal Risk: Ensure soft landing of household debt, Swift corporate restructuring
  • 15. 14 Creating Jobs for Youth and Women Stabilizing Public Livelihoods 2. Creating Jobs & Stabilizing Public Livelihoods Stabilizeprice of necessities Ease the burden of living expenses Bolster the middle class to provide more opportunityfor climbingup the social ladder III Policy Development
  • 16. 15 Reform of Public Sector Economic Democratization III Policy Development 3. Improving Economic Fundamentals Export & Overseas Expansion Creative Economy
  • 17. 16 4. Strengthen Policy Effectiveness Wide public access to fiscal & public sector information Information access will be more easy and convenient Cooperation Openness Sharing Encourage ministerial collaboration Develop public-private cooperation models Regularly review policy implementation Establish an economic policy portal Implement , Monitor, Strengthen Policies III Policy Development
  • 18. 17 IV The Three-year Plan for Economic Innovation 1. Overview 2. Economy with Strong Fundamentals 3. Economy with Dynamic Innovation 4. Economy with a Balance between Exports and Domestic Demand
  • 19. 1. Overview 18 IV The Three-year Plan Accomplishing an era of happiness for the peopleObjective 3 Major Strategies Economy with Strong Fundamentals Economy with Dynamic Innovation Economy with a Balance between Exports and Domestic Demand 9+1 Tasks Reform public sector Build a market economy based on principles Establish a strong social safety net Develop creative industries Invest for the future Make inroads into overseas market Improve the investment environment Strengthen domestic demand Encourage the labour force participation of youth and women Prepare reunification
  • 20. Strategy 1. Economy with Strong Fundamentals 19 IV The Three-year Plan Reform Public Sector Build a Market Economy based on Principles Establish a Strong Social Safety Net Normalize public institutions Apply the principle of competition to public institutions Reform finance Settle fair trade and protect consumer’s right Labor-management relations in communication and compromise Strengthen safety net for the people suffering during the economic innovation process Escape poverty through work
  • 21. Strategy 2. Economy with Dynamic Innovation 20 IV The Three-year Plan Develop Creative Industries Invest for the Future Make Inroads into Overseas Market Establish 17 creative economic innovation centres On-line “creative economy towns” Expand R&D and human capital Respond to issues on climate, environment, and energy Expand strategic FTAs Export overseas construction, plant, and contents
  • 22. Strategy 3. Economy with a Balance between Exports and Domestic Demand 21 IV The Three-year Plan Improve the Investment Environment Strengthen Domestic Demand Encourage the Labour Force Participation of Youth and Women Manage households debt Normalize housing sales market Stabilize lease market Establish regulatory reform system Promote promising service industry Vitalize local economy Addressing difficulties in employment (process) of youth Preventing severance of women career path