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(News Focus) S. Korea to focus on building foundation for long-term growth in H2

Economy 14:00 July 04, 2023

By Kang Yoon-seung

SEOUL, July 4 (Yonhap) -- South Korea's economic policy report unveiled Tuesday focused on laying the groundwork for the long-term and sustainable growth of Asia's fourth-largest economy amid signs of a recovery in its exports and employment, along with a slowdown in inflation.

In its latest report on the economic outlook for 2023, the Ministry of Economy and Finance said the country's economy is expected to grow 1.4 percent this year, down 0.2 percentage point from the previous estimate, citing uncertainties, along with sluggish exports during the first half.

South Korea, however, pointed out that it was notable that major economic indicators showed signs of a recovery, adding that the trend is anticipated to continue for the remainder of the year despite some uncertainties.

"Throughout the second half, the economic environment will gradually recover, and major indicators, such as prices and employment, will remain sound amid some uncertainties," the Ministry of Economy and Finance said.

Jobseekers participate in an employment event in central Seoul on May 31, 2023. (Yonhap)

Jobseekers participate in an employment event in central Seoul on May 31, 2023. (Yonhap)

Following the signs of the economic recovery, the finance ministry said it will focus on addressing the long-term tasks of the economy, including the population crisis, slowing productivity and global fragmentation, in order to "reshape" its economic health.

South Korea will especially focus its efforts on revitalizing exports as their recovery will play a crucial role in the full-fledged economic rebound.

The country reported a trade surplus in June for the first time in 16 months, but its outbound shipments fell for the ninth consecutive month due mainly to weak demand for semiconductors.

The month nevertheless saw the smallest on-year export decline so far this year, possibly indicating that the country's exports may rebound in the second half of the year.

"By utilizing summits and offering trade finances of 184 trillion won (US$139 billion), we plan to back the rebound of exports in the second half," First Vice Finance Minister Bang Ki-sun told reporters during a briefing in the central city of Sejong.

To put exports on a recovery track, the government said in the report that it plans to send trade delegations to major destinations to offer support to exporters, helping them find potential buyers.

South Korea will also focus on providing financial support to small and medium-sized companies, the ministry added.

Other tasks include tapping overseas defense and nuclear reactor projects, offering governmentwide support for companies seeking such opportunities, with a goal to emerge as the world's No. 4 player in the defense sector by 2027.

The country will aim to utilize official development assistance projects as well.

"South Korea will approve high-value Economic Development Cooperation Fund (EDCF) projects and raise the amount of such arrangements, while seeking new agreements with partners, such as the Philippines and Indonesia," the government said.

The government will also offer tax cuts to local companies participating in overseas construction projects.

Containers are stacked at a pier in South Korea's largest port city of Busan on July 2, 2023. (Yonhap)

Containers are stacked at a pier in South Korea's largest port city of Busan on July 2, 2023. (Yonhap)

In response to the restructuring of the global supply chain due to protectionism policies by major countries, South Korea will extend support to companies seeking to relocate their overseas facilities to domestic soil. These support measures will be in line with those provided to foreign companies.

Going forward, South Korea will also review its research and development policies, and roll out aggressive investment in prominent areas, including space, aviation, quantum, bio and artificial intelligence.

"Based on freedom and creativity, we plan to foster science technologies and cutting-edge industries that will serve as new growth engines of the future," the ministry said.

The second-half economic policy report, meanwhile, also focused on measures to address the country's dire population crisis.

The number of babies born in South Korea has been falling on-year for 89 consecutive months through April, with only 18,484 being born in the month, separate data from Statistics Korea showed. It marked the lowest number for any April since the statistics agency started compiling monthly data in 1981.

According to the agency's analysis, individuals aged 65 and above are projected to comprise 46.4 percent of the total population by the year 2070.

The government plans to announce detailed measures to utilize foreign workers by studying cases from other countries in the fourth quarter, with potential policies including extending the scope and period of work visas.

South Korea will take significant measures to tackle the declining population in rural areas by implementing substantial deregulation efforts. These initiatives will focus on enhancing the living environment while also allowing more foreigners to work in the agricultural sector on a long-term basis.

To alleviate the burden of child care in South Korea, the government will consider expanding opportunities for foreigners to work in the child care sector. Currently, the law allows such employment only to Chinese nationals of Korean origin.

Effectively dealing with climate change was also on the government's long-term growth agenda.

"Through efficient use of energy, revitalizing the ecosystem of nuclear energy and pursuing carbon neutrality, we plan to beef up our capability to deal with the climate and energy crises," it added.

Baby products are displayed at an exhibition in Seoul on June 29, 2023. (Yonhap)

Baby products are displayed at an exhibition in Seoul on June 29, 2023. (Yonhap)


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