South Korea will focus policy efforts more on boosting economic growth and allocate additional state funds to support small companies and exporters, Finance minister Bahk Jae Wan said.
“We need to make more effort to support economic growth as some progress has been made in terms of stabilisation” of prices, Bahk told reporters in Seoul yesterday. “We’re not in a situation where we need an extra budget but we will try to use more state funds to support small firms and exporters.”
Bahk reaffirmed the government’s commitment to draft a budget that will achieve fiscal balance by next year, reducing its fiscal deficit to zero.
South Korean officials are trying to sustain momentum in Asia’s fourth-biggest economy after the fastest growth in a year in the first quarter. A slowdown in China and the risk of a Greek exit from the euro are clouding the outlook for exports which account for about half of gross domestic product.
South Korea’s overseas shipments declined for a third month in May, adding pressure on the central bank to hold off from raising interest rates at a meeting on June 8.
Exports fell 0.4 percent from a year earlier in May, after a revised 4.8 percent decline the previous month, the Ministry of Knowledge Economy said June 1. The median estimate in a Bloomberg News survey was for a 1.1 percent drop. A separate report showed inflation held at a 21-month low of 2.5 percent in May.
While South Korea’s gross domestic product expanded at the fastest pace in a year last quarter, the Bank of Korea reduced its 2012 growth forecast to 3.5 percent from 3.7 percent on April 16 as the outlook for Europe’s economies worsened. -By Cynthia Kim and Eunkyung Seo