South Korea’s government has recently announced its biannual economic policy plan, which prioritizes supporting people’s livelihoods and managing potential risk factors. This decision comes as the country reduces its GDP forecast for 2024 and raises its inflation projection. The finance ministry expects the economy to grow by 2.2% in 2024, a decrease from the initial projection of 2.4% in July. Additionally, consumer prices are anticipated to rise by 2.6% this year, an increase from the previous forecast of 2.3%.
Despite anticipating a stronger economic recovery in 2024 due to improvements in global trade and semiconductor demand, the finance ministry acknowledges challenges in domestic demand and people’s livelihoods caused by persistently high inflation and interest rates. As a result, the government is committed to focusing on the economic recovery of the common people while effectively managing potential risk factors.
To address the issue of inflation, the finance ministry aims to bring the inflation rate down to 2% within the first half of 2024. In order to achieve this goal, the government plans to implement various policy measures, including tax and tariff cuts, as well as freezing public utility costs. These measures intend to alleviate the impact of rising prices on the public and stimulate overall economic activity.
The South Korean government plans to increase tax exemptions on credit card spending to boost consumption levels. Additionally, efforts to attract more foreign tourists will continue, including the exemption of visa issuance fees for group tourists from China and other Asian countries. These initiatives aim to stimulate domestic spending and support the tourism sector, which has been severely impacted by the COVID-19 pandemic.
For companies, the finance ministry will introduce temporary tax cuts on investments in research and development (R&D). Moreover, existing tax breaks on facility investments will be extended until the end of 2024. These measures aim to incentivize innovation and investment, driving economic growth and competitiveness in South Korea.
To prevent a potential credit crunch in the construction industry and real estate projects, the ministry plans to expand liquidity support measures if needed. This decision comes after concerns were raised when a mid-sized builder recently applied for debt restructuring. The government aims to mitigate risks in the construction sector and ensure the stability of the overall economy.
South Korea’s government is taking a pragmatic approach to address the challenges facing the economy. By prioritizing the livelihoods of its citizens and implementing measures to combat inflation, boost consumption, and support industries, the government aims to promote sustainable and inclusive economic growth. Furthermore, by effectively managing and monitoring potential risk factors, South Korea seeks to ensure the stability and resilience of its economy in the years to come.
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