South Korea's economy will gather further momentum next year but the government will maintain a growth-supportive policy stance in the face of elevated risks both at home and abroad, the finance ministry said yesterday.
The government's priority would be boosting domestic demand and protecting Asia's fourth-largest economy and its financial markets from possible effects from big policy events in the United States and Japan, the ministry said.
The Ministry of Strategy and Finance set next year's economic growth target at 3.9 per cent, up from a projected 2.8 per cent rise this year, reflecting its confidence that growth momentum will not falter.
"Signs of recovery in our economy are getting stronger, but many tasks remain for it to enter a full-fledged growth trajectory," it said.
This is in line with the Bank of Korea's forecast of 3.8 per cent growth for next year.
Globally, the ministry cited uncertainties regarding the US Federal Reserve's campaign to reduce its bond-buying stimulus and the Japanese government's policy of printing new money to end deflation as the main risks.
Since taking office in February this year, President Park Geun-hye has pledged to focus policy priorities on strengthening domestic demand instead of simply aiming to lift growth by supporting exporters.
Economic growth hit a two-year high of 1.1 per cent in the second and third quarters on a sequential basis while more recent data showed a sharp pick-up in capital investment in October. Exports in December were likely to rise 6.4 per cent from a year earlier, a poll showed.
Korean policymakers want this improving momentum to lead to further increases in spending by companies and consumers, who have been cautious due to uncertain prospects abroad and heavy household-debt burdens.
Korean households' ratio of debt to disposable income was at 153.4 per cent last year, said the Organisation for Economic Co-operation and Development, well above the OECD average of 121.3 per cent.
The government has been introducing measures to curb expansion of household debt and help ease burdens from it. A ministry official said further steps would be taken as early as next month.
It also planned to take fresh measures to remove more of the regulatory restrictions hampering corporate investment and productivity in the services sector, the ministry said.
"Our goal is not only to ensure a simple recovery, but to look ahead to the next three to four years and strengthen the country's fundamentals," said Kim Chul-ju, the director general for economic policy at the ministry.