Next year’s economic policy, Omicron and the presidential election are variables… Growth rate expected to be in the low 3% range

The government is likely to announce it in the fourth week of this month… Post-COVID-19 stabilization and risk management focus

(Sejong = Yonhap News) Reporter Cha Ji-yeon and Kim Da-hye = The government will soon come up with a ‘big picture’ of next year’s economic policy amid the huge variables of the emergence of Omicron, a new mutant virus of the novel coronavirus infection (COVID-19), and the presidential election in March next year. put

We are preparing an economic policy direction that focuses on economic stabilization for daily recovery next year, management of risks accumulated over the years, such as supply chain, inflation, and household debt, and growth in the low 3% range.

According to related ministries on the 5th, the Ministry of Strategy and Finance plans to announce the economic policy direction for 2022 with this content in the fourth week of this month.

◇ Focus on economic stabilization and normalization… Risk management such as inflation and debt

The government implemented economic policies last year and this year, focusing on an active response to overcome the wave of the COVID-19 crisis, but next year’s economic policy is expected to be somewhat different.

The government’s plan is to shift the focus to post-crisis economic management as the vaccination rate has risen to a significant level and a treatment is being developed.

The government is preparing its economic policy direction based on three main pillars: stabilization, risk management, and future response.

First, in order to focus on stabilizing and normalizing the economy to return to the pre-crisis growth path, it is planning to provide intensive support to those who have been particularly affected by COVID-19.

The method and speed of the ‘exit strategy’ of financial, fiscal, and tax measures implemented in the course of responding to the crisis is also being considered.

It is also expected to present a plan to manage accumulated internal and external risk factors.

The consumer price inflation rate soared to 3.7% in November, and as of the second quarter of this year, the household debt-to-GDP ratio stood at 104.2%, the highest among 37 countries in the world.

Uncertainties in the external sector caused by disruptions in global supply chains and monetary policy shifts in major countries are also considered as major risk factors.

Structural reform measures to respond to the future, such as digital and green transition for the ‘post-coronavirus’, are also expected to become one of the big topics in the economic policy direction.

Kyu-cheol Gyu-cheol, head of economic forecasting at the Korea Development Institute (KDI), suggested that “in the short-term, countermeasures against supply chain disturbances are necessary, and in the mid-to-long term, policies to support carbon neutrality and digital transformation should be prepared.”

Professor Seong Tae-yoon of Yonsei University said, “In order to adjust the heightened price pressure, the economic policy direction should include measures to recover liquidity without burdening the economy, countermeasures to global supply chain problems, and concerns about taxes and finances.”

◇ Review of next year’s growth rate in the early 3% range… Inflation is also raised from the previous 1.4%

The government plans to adjust the forecast for this year’s growth rate and inflation rate in the economic forecast announced along with the economic policy direction.

Previously, in the economic policy direction for the second half of June, the government presented this year’s growth rate of 4.2% and the inflation rate of 1.8%.

The government is considering ways to slightly lower the growth outlook for this year, as it is difficult to achieve a growth rate of 4% due to a slower-than-expected growth rate in the third quarter, the emergence of omicron mutations in the fourth quarter, and strengthened quarantine measures.

As for the inflation rate, Deputy Prime Minister and Minister of Strategy and Finance Hong Nam-ki predicted 2.3 to 2.4 percent.

It is known that next year’s growth rate is expected to be in the low 3% range. In the economic policy direction for the second half of the year, 3.0% was suggested, but no significant adjustment is expected.

The inflation rate for next year is expected to be revised significantly higher than the previous estimate of 1.4% in consideration of recent price trends and domestic and foreign institutions’ forecasts of around 2%.

◇ Omicron’s economic blow and changes in economic policy after the election are variables

The biggest variable for next year’s economic policy direction is the emergence of omicron mutation and the presidential election on March 9th next year.

While the fourth wave of COVID-19 is currently underway, an Omicron mutation infection has been confirmed in Korea, and as quarantine measures such as limiting the number of private gatherings and quarantine passes have been strengthened, a blow to the economy is inevitable for the time being.

The key is ‘how big and how long the aftermath of the micron mutation will come,’ but it is not easy to predict yet. This means that it is not easy to change the contents of the economic policy direction to be announced soon.

A government official said, “We are closely monitoring the impact of the Omicron mutation on the economy, and we are contemplating to what extent it will be reflected in economic policy directions and economic prospects.”

Election is also a big factor. This is because the overall tone of economic policy itself can change depending on who becomes the new president.

However, the government is planning to set a policy direction that can serve as a ‘bridge’ between the current government and the next government in accordance with the economic situation, regardless of the presidential election.

Deputy Prime Minister Hong urged the Ministry of Strategy and Finance to give special attention to finding the optimal policy direction and content for this situation, as next year is the ‘year where the end of the current government and the beginning of the next government go together’.

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2021/12/05 06:02 Send