South Korea Adjusts 2024 Economic Plan, Prioritizes Livelihoods Amid GDP Cut and Inflation Increase
South Korea's government is shifting its focus to supporting people's livelihoods and managing risk factors as it revises its economic plan for 2024. In its biannual economic policy announcement on Thursday, the finance ministry adjusted the country's GDP forecast, expecting a growth rate of 2.2% in 2024, down from the previously projected 2.4% in July. The economy expanded by 1.4% in 2023, marking a three-year low.
The finance ministry also revised its inflation projection, anticipating consumer prices to rise by 2.6% in 2024, up from the previous forecast of 2.3%. In 2023, prices increased by 3.6%.
Despite a positive outlook for South Korea's exports, particularly in the semiconductor industry, the government acknowledged challenges in domestic demand and people's livelihoods due to persistent inflation and high-interest rates. The central bank has maintained its policy interest rate at 3.5%, the highest since late 2008, in its ongoing efforts to combat inflation.
The government outlined a strategy focusing on economic recovery for the general population while actively managing potential risk factors. To address inflation, the finance ministry aims to bring it down to the 2% level within the first half of 2024 through policy measures such as tax and tariff cuts and freezing public utility costs.
To stimulate consumption, the government plans to increase tax exemptions on credit card spending and continue initiatives to attract foreign tourists, including waiving visa issuance fees for group tourists from China and other Asian countries.
For businesses, the finance ministry announced temporary tax cuts on research and development investments and an extension of existing tax breaks on facility investments until the end of 2024. In response to concerns over the construction sector, the ministry expressed readiness to expand liquidity support measures if necessary to prevent a credit crunch in builders and real estate projects.
South Korea's economic policy adjustments reflect a delicate balance between stimulating growth, managing inflation, and addressing potential risks in key sectors.
