South Korea’s Finance Minister Hong Nam-ki showed confidence of an economic rebound this year, placing a positive meaning on the 2 percent growth in 2019.

"(The Korean economy) defended the psychological Maginot Line" of 2 percent, Hong said Wednesday after the Bank of Korea released its latest estimates of gross domestic product (GDP) data.

The Korean economy grew 2 percent in 2019 from the previous year, its worst performance in a decade but in line with previous estimates. The pace of growth in the final quarter was the fastest last year at 1.2 percent, suggesting signs of recovery.

“Markets have been skeptical of a 2 percent growth rate, raising concerns of a protracted slump,” Hong said. “By achieving 2 percent annual growth, we’ve put those worries to rest and gained the confidence to build the momentum for an economic recovery.”

The government will go all out to help the economy achieve its growth target this year of 2.4 percent, he added.

Hong also stressed the role of government. While acknowledging that growth should primarily be led by the private sector, he said “fiscal policy needs to support the corporate sector when it is struggling,” and noted that “last year’s fiscal plans diligently fulfilled that role.”

Government spending in the fourth quarter added 1.0 percentage point to GDP growth compared with the previous three months and 1.9 percentage points from a year earlier. Korea released an extra $5 billion stimulus package last year in efforts to prop up the fast-cooling economy. It also proposed a record $423 billion budget for 2020, up 9.3 percent from the previous year.

Hong in the Wednesday meeting unveiled plans to provide 2.1 trillion won ($1.8 billion) in financial support to the materials, parts and equipment sectors this year under a state initiative to groom key sectors with high Japanese reliance.

Tensions between Korea and Japan flared in July after Tokyo curbed exports to Seoul of key materials used in memory chips and display panels, taking a direct aim at Korea’s pillar industries. The rift deepened as the two countries dropped each other from their list of trusted trade partners.

The Korean government and local chip and display makers have since been making efforts to diversify imports and locally source key industrial components. Korea last year pledged to invest 7.8 trillion won over the next seven years to strategically foster 100 key sectors with an aim to achieve tech self-sufficiency.

By Pulse

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