South Korea faces risk of long-term economic slump: president

[SEOUL] South Korea's economy was still in crisis despite some signs of improvement and it faces the risk of falling into a long-term slump, President Park Geun-hye said on Wednesday.

In a televised parliamentary speech on next year's budget bill, Mr Park cited low economic growth, low inflation and the weak yen as three main risks facing Asia's fourth-largest economy and its corporations. "We are at the crossroads between achieving another leap forward and falling into a stagnation, and this is the golden time to rebuild the economy," Mr Park said, while also saying an ageing population was a risk to the trade-reliant economy.

South Korea's economic growth is set to pick up to the mid-3 per cent level this year from 3 per cent recorded last year and the employment rate to 65 per cent from 64 per cent, Park said.

She reiterated her commitment to transforming the economy, currently dominated by big manufacturers such as Samsung Electronics and Hyundai Motor, into a more balanced one between manufacturing and service sectors. "We must pursue more balanced growth between domestic and exports, companies and households, and manufacturing and service industries for sustained growth of the economy," she said.

The government has submitted to parliament for approval next year's budget bill, including plans to increase fiscal spending by 5.7 per cent to 376.0 trillion won (US$359.4 billion) from this year.

The country's fiscal year starts on Jan 1 and parliament is due to finalise the budget plans by Dec 2, although it has frequently missed the deadline.

Finance Minister Choi Kyung-hwan has warned of increasing deflationary risks and promised to keep fiscal policy loose for the remaining three years of President Park's tenure.

REUTERS