SEJONG/SEOUL, June 27 (Yonhap) -- South Korea's economy will likely grow 2.7 percent this year, the government forecast Thursday, revising up its earlier growth outlook as it expects to see positive impacts from its back-to-back stimulus measures in rejuvenating the country's overall economic conditions.
The latest estimate is higher than the 2.3 percent gain the government forecasted in March, about a month after President Park Geun-hye was inaugurated, according to the finance ministry. The growth revision is part of its broad policy management plans for the second half of this year.
The upgrade comes despite heightened external uncertainty sparked by worries that the U.S. might scale back its stimulus plans, China's economic growth might be slowing and overall trade conditions are deteriorating due to the Japanese yen's weakening trend.
South Korea's economy has been showing signs of losing traction in the face of slowing exports and anemic domestic demand. Its gross domestic product grew by less than 1 percent for the past eight consecutive quarters.
Since President Park took office in February, the government has engaged in various stimulus efforts including a 17.3 trillion won (US$14.99 billion) supplementary budget and a set of policies aimed at boosting the slumping property market along with measures to boost investment in the corporate sector.
The country's central bank also slashed its benchmark interest rate by 0.25 percentage point in May in an apparent bid to help the government effort to keep the economy going.
"We expect to see our economic growth rate to rise by 0.4 percentage point from the previous forecast given the policy impact from the extra budget, property-boosting measures and the interest rate cut," Choi Sang-mok, the head of the finance ministry's economic policy bureau, told reporters in a briefing.
"Under the previous forecast, we expected the growth rate to stay below 1 percent on a quarter-to-quarter basis even in the second half, but raising the outlook means that we intend to break such a low-growth trend," he added.
The government also forecast that Asia's fourth-largest economy will expand 4 percent next year.
The picture that the government is painting seems to be somewhat optimistic compared with estimates offered by some major think tanks.
Taking into consideration the latest volatile financial and economic situations sparked by U.S. Fed Chairman Ben Bernanke's remarks on a possible winding down of its bond-buying program, some experts worry that the government has set its bar "too high."
"Just with the news about the possible winding down of quantitative easing by the U.S., our stock markets tumbled. Things will likely get worse in its execution process," said Lee Man-woo, a professor at Korea University. "The government came out with a hopeful forecast but given the current situations at home and abroad, it is an excessive assumption."
The government defended its outlook, saying that expected downside risks can be mostly offset by the economic recovery in the U.S. and the government's economy-boosting measures that have been unveiled over the past few months.
Along with the growth outlook revision, the government also upgraded its projections for other main economic indicators.
The government expected to generate about 300,000 jobs this year, a rise from its earlier forecast of 250,000. The forecast for the overall employment rate was inched up from 64.6 percent to 64.7 percent.
The government also forecast that the country will register a current account surplus of $38 billion this year, up from its previous outlook of $29 billion. Consumer prices will likely grow 1.7 percent, lower than a 2.3 percent gain it predicted in March.
The government's economic policy direction, meanwhile, will be focused on making efforts to revitalize the livelihoods of ordinary people. This means that it would push for active macroeconomic measures aimed at improving conditions for domestic demand and exports, strengthen risk management and ease the difficulties people face in trying to make ends meet.
In a related move, the government said it will assign much of the money secured from its extra budget plan during the third quarter and expand its fiscal spending on social overhead capital including power generating facilities by about 500 billion won this year.
It also plans to unveil a set of measures in July designed to bolster business activity in the service sector, a move expected to help stimulate overall domestic demand.
"We drew up the second-half economy management plan based on the recognition that the overall economic situations facing us are not favorable," Finance Minister Hyun Oh-seok said during a joint press briefing held in Seoul. "We do not think that the economy has fully recovered. The active macroeconomic policy mix has to be kept in place."
Hyun added that uncertainty over policy directions, lackluster profit outlooks and the investment capacity of companies are major factors that determine whether a business will make an investment or not, saying that the government will work hard to create an investment-friendly environment through diverse channels, including de-regulation.
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