□	최근 우리 경제는 수출의 호조세가 유지되고 내수의 회복세가 확대되면서 전반적인 경기 안정국면을 지속하는 모습

• 민간부문의 고용 회복도 점차 가시화되면서 경기상승을 뒷받침

□	향후 세계경제가 비교적 견실한 회복세를 나타낼 것으로 예상되는 가운데, 우리 경제의 성장세도 당분간 지속될 것으로 전망됨.

• 2010년도에는 5%대 후반의 성장률을 기록할 것으로 예상
   
• 2011년도에도 우리 경제의 견실한 성장세가 예상되나, 성장속도가 안정화되 면서 4%대 중반의 성장률을 나타낼 것으로 전망

□ The recent Korean economy continues to show signs of overall stability as exports maintained an upward trend and the recovery pace of domestic demand expanded. The employment in the private sector is also recovering gradually, supporting the upward trend of the economy   □ As the relatively robust recovery is expected for the global economy for the near future, the Korean economy is also forecasted to record a robust growth for a while. The growth rate of the Korean economy for 2010 is projected to reach upper 5%.   The Korean economy in 2011 is expected to grow steadily at a mid 4% range, as the growth pace stabilizes downward.

 

　

Ⅰ. Current Economic Conditions

 

□	Following the higher-than-anticipated recovery pace since the second quarter of 2009, the Korean economy has maintained a stable upward trend since the beginning of 2010.

• On a seasonally adjusted quarter-on-quarter basis, the Korean economy recorded a growth of 1.8% (annualized growth rate of 7.4%) in the first quarter of 2010, 0.2% (annualized 0.8%) higher than the fourth quarter of 2009.
   

□	The recent upward trend of the economy is mainly driven by a strong gradual recovery in domestic demand in the private sector centering on consumption and equipment investment while exports continued to improve.

• Korea's exports have continued to grow, as advanced economies as well as Asian emerging markets, such as China, showed improvement in demand along with the economic recovery.
  
  - Goods exports (real, national accounts) for the first quarter rose by 3.4% on a quarter-on-quarter basis (21.3% on a year-on-year basis), and exports per workday (seasonally adjusted) as well showed continuing improvement in exports.
   
• Private consumption appears to continue an upward trend overall, as the recovery pace of durable goods consumption is spreading across non-durable goods and services.
  
  - As the terms of trade gradually improve, GDI (Gross Domestic Income) has risen and the real wage growth rate rebounded to the positive side in the fourth quarter of 2009, meaning that consumer spending is expanding, upholding the recovery pace of private consumption.
   
• Equipment investment continues to recover at a fast pace, supported by the improvement in corporate profitability and the decrease in import costs of capital goods and machineries due to the recovery in the won's value.
  
  - Meanwhile, recent construction investment appears to moderate slightly, after a relatively healthy performance in 2009 influenced by the rise in civil engineering due to expansionary fiscal spending.
   

□	The recovery pace seen in both exports and domestic demand has led to the moderation in sluggish employment.

• Entering 2010, the number of hired workers reversed upward on a monthly year-on-year basis, suggesting that the recovery pace of employment seems more apparent thanks to the private sector.
  
  - The number of hired workers in April rose by 401,000 (1.7%) on a year-on-year basis. The number of hired workers in non-public sectors (excluding public administration, defence compulsory and social security) recorded 303,000, leading the upward pace of the total number of hired workers.
  
  - The unemployment rate has stabilized since last March, after a sharp rise due to temporary increase in job seeking, such as applying for the Hope Work program during January and February.
   

□	The global economy continues to recover at a gradual pace, led by developing countries, although it still faces concerns over public finance deficits in some advanced economies.

• Employment which contracted significantly in advanced economies, including the US, is stabilizing moderately. With the improvement in exports and consumption, the recovery pace of the economy appears to expand gradually.
  
  - The recovery pace of Eurozone however remains relatively poor due to the spread of fiscal problems in some countries.
   
• With developing countries, such as China, growing faster than anticipated, IMF and major economic forecasters have revised upward their forecast for the global economic growth rate.
   
• Considering that the global economy is projected to recover at a steady pace, Korea's exports are expected to continue to improve for a while.
  
  - Current account is projected to record a reduced surplus, as the rising oil prices and value of the won are expected to increase Korea's imports.
   

□	Meanwhile, the financial market appears to remain relatively stable, but now is the time to call for efforts for de-leveraging in a pursuit of structural stability of the financial market to support a sustainable growth.

• The policy stance of expanding the liquidity provision and maintaining the low interest rates which were implemented to buffer the impacts by the global financial turmoil has contributed to the economic recovery and financial market stabilization, but at the same time it has delayed de-leveraging that corresponds to the changes in economic conditions at home and abroad.
  
  - As for households, the debt ratio against GDP rose to 80%, meaning that it would be difficult to exclude the possibility of a growing pressure of repayment and insolvency risks, when the rapid rise in household debt continues, although the possibility of an outbreak of massive default problems is low.
  
  - As for corporations, the debt ratio against GDP reached above 110%, meaning that a full-scale de-leveraging is required, centering on loans to SMEs and the construction sector which posted a sharp rise from 2005.
  
  - The government debts have so far remained relatively stable, but it is necessary to continue persistent efforts to reduce the debts in order to be prepared for financial instability which could occur in the course of de-leveraging of the private sector, not to mention minimizing concerns over fiscal soundness in the future.
   

□	In this context, it would be appropriate that the economic policy for now should shift its focus towards securing the mid term efficiency through structural reforms, while pushing for normalizing the expansionary policy stance without failure.

• Macroeconomic policies are recommended to push for the normalization procedure of the expansionary policy stance with a goal of achieving stable growth.
  
  - Now that the continued steady recovery of the economy has significantly reduced the necessity to maintain a stimulus stance, it appears that conditions are mature enough to normalize the low interest rate policy.
  
  - For fiscal policies, it is necessary to lay the mid- and long-term foundation for healthy public finance by phasing out concerns for government's potential debts through efficiently controling the debts of public corporations, while more actively pushing for policy normalization and the restructuring of revenue and expenditure.
   
• In addition, it is necessary to minimize policy uncertainty related to medium-to-long term growth potential and to enhance resilience to changes in external conditions.
  
  - Policy focus needs to be shifted toward restructuring-oriented as an attempt to improve economic efficiency necessary to pursue a sustainable growth of the Korean economy after the crisis.

　

 

Ⅱ. Economic Outlook for 2010~2011

1. Major Assumptions

□	The Global Economy: The global economy is projected to grow at a robust pace between 2010 and 2011, gradually coming out from the impacts of the global financial crisis.

• Amid the continued relatively steady growth of developing countries, including China, advanced economies including the US turned around toward recovery. Accordingly, the global economy is assumed to register at lower 4% range in both 2010 and 2011, up from the downward trend in 2009 (-0.6% according to IMF projection).
  
  - When the concern over public finance in some European countries is actualized and brings large impacts on global financial markets, it is possible that the recovery pace of the global economy will slow down and the upward trend of the Korean economy as well will be adversely affected.
   

□	Oil Prices: The projected oil prices (import unit price) for 2010 and 2011 are mid $80 and $90 range, respectively (per barrel, on annual average), gradually rising from $60 per barrel of 2009, as the global economy recovers.

□	Real Effective Exchange Rate (REER): The Korean won is expected to maintain the moderate pace of appreciation from the present level.

　

 

2. Major Forecasts for 2010

□	Korea's GDP growth rate is projected to record in the 5% range in 2010.

• The Korean economy is expected to register a 5.9% growth rate on an annual basis, as the global economy recovers, thereby supporting the steady upward trend of exports and continuing the recovery pace of domestic demand led by private consumption and equipment investment.
  
  - On a quarter-on-quarter basis, Korea's GDP growth is projected to continue at around 1% from the second quarter.
   
• Private consumption is expected to register a high 4% level growth as the overall economic conditions, such as income and employment improves.
   
• Equipment investment is projected to register a growth rate of a mid 17% range, due to the improvement in corporate profitability and the stabilization in foreign exchange rate.
   
•   Construction investment is forecasted to record a growth rate of 1% or slightly higher than that, as the investment in SOC projects in the public sector rises albeit the continued sluggish performance in the private sector.
   
• The goods export (in volume terms) in 2010 is forecasted to register a growth rate of mid 12% level, significantly up from 2009 (0.0%), due to the recent rise in overseas demands by the steady recovery of the global economy.
   
• The goods import (in volume terms) in 2010 is expected to register around 15% growth, a sharp rise from 2009 (-7.9%) due to the recovery pace of domestic demand and the stabilized foreign exchange rate.
   

□	Current account is expected to record a surplus of around $11 billion, a large drop from the previous year ($42.7 billion), as the import growth remains higher than the export growth due to the recovery of domestic demand and the rising prices of oil and raw materials.

• Goods account surplus in 2010 is expected to record around $34 billion, a fall from 2009 ($56.1 billion).
   
• Accounts of service·income·transfers are projected to record a highly increased deficit of around $23 billion, compared to 2009 ($13.5 billion) as service account deficit is expected to rise due to the recovery of domestic economy and the stabilization of the foreign exchange rate.
   

□	The unemployment rate which reached 4.7% in the first quarter due to the rise in job seekers is forecasted to stabilize gradually to register around 3.4% on average in 2010, as domestic demand continues to recover.

• Despite the reduction in public employment, such as the Hope Work program, as the number of hired workers in 2010 is expected to rise by slightly higher than 200,000, the recovery pace of the employment market in the private sector becomes more apparent.
   

□	Headline CPI inflation for 2010 is forecasted to record around 3% on annual average, owing to the overall economic recovery.

• Such inflationary factors as impot prices, due to the rise in international crude oil prices, are likely to be largely offset by the falling foreign exchange rate, but the inflation for 2010 is projected to record around 3.0% level due to the growing demand pressure caused by the recovery of the domestic demand.

　

 

2. Major Forecasts for 2011

□	Korea's GDP growth rate is projected to record in a mid 4% range in 2011, as the global economic recovery is being maintained at a moderate pace.

• Private consumption growth is expected to register at 4% range, a level similar to the GDP growth, as the upward trend continues in overall economic conditions, such as income and employment.
   
• Equipment investment is projected to register a stable growth of 7% level, as the relatively robust economic growth continues on.
   
• Construction investment is forecasted to remain at a low growth of around 1%, as large increases in both private and public sectors are hardly expected.
   
• The goods export (in volume terms) in 2011 is forecasted to register a growth rate of around 10%, as the overseas demand continues to increase influenced by the continued growth of the global economy.
   
• The goods import (in volume terms) in 2011 is expected to register around 10% growth, as the domestic economy continues its steady growth, thereby maintaining imports and demand.
   

□	Current account is expected to record a decreased surplus of around $5 billion, as the import growth rises relatively higher due to the continued economic recovery.

• Goods account surplus in 2011 is expected to record a reduced surplus of around $29 billion, compared to the previous year.
   
• Accounts of service·income·transfers in 2011 are projected to record around $24 billion deficit, a level similar to 2010 as deficit factors such as travel account deficit are moderated, due to the decelerating slowdown of foreign exchange rate.
   

□	Headline CPI inflation for 2010 is forecasted to record around 3% on annual average, owing to the overall economic recovery.

 

□	Headline CPI inflation for 2010 is forecasted to record around 3% on annual average, owing to the overall economic recovery.

 

 

Economic Forecast for 2010~11

(year-on-year basis, %, USD 100 million)

	2009	2010					2011
	Annual	1/4	2/4	3/4	4/4	Annual	Annual
GDP (seasonally adjusted quarter-on-quarter) Private Consumption Equip. Investment Const. Investment Total Exports(Quantity) Total Imports(Quantity)	0.2 0.9 -9.1 4.4 0.0 -7.9	7.8 (1.8) 6.2 28.8 1.9 21.3 22.1	6.7 (1.1) 4.2 23.5. 0.5 10.0 15.3	4.2 (1.0) 3.8 13.5 1.2 7.1 9.8	5.3 (1.2) 4.7 8.3 1.5 12.9 13.8	5.9 4.7 17.6 1.2 12.4 15.0	4.4 4.1 7.1 0.9 10.6 10.7
Current Account 　Goods Trade Balance 　Exports (%) 　Imports (%) 　Service·Income· 　Current Transfers	427 561 (-13.7) (-25.7) -135	12 73 (32.6) (37.9) -61	36 91 (18.7) (34.9) -56	20 78 (12.2) (22.6) -58	45 100 (15.6) (24.3) -55	114 343 (19.0) (29.2) -229	49 288 (10.5) (12.8) -239
CPI Inflation (Core inflation)	2.8 (3.6)	2.7 (1.9)	3.0 (1.7)	3.1 (2.0)	3.1 (2.3)	3.0 (2.0)	3.3 (3.0)
Unemployment Rate (Seasonally adjusted)	3.6	4.7 (4.3)	3.6 (3.6)	3.4 (3.5)	3.3 (3.5)	3.7	3.5

　Note: 1) p denotes preliminary estimates.

 

Ⅲ. Policy Recommendations

1. Fiscal Policy

□	For fiscal policies, it is necessary to implement active revenue and expenditure restructuring in order to normalize the policy stance, as well as early recovery of fiscal soundness.

• It is recommended that expansionary fiscal policy stance should be normalized through active expenditure restructuring such as putting an end to temporary fiscal spending measures as scheduled which were adopted to counter the crisis.
   
• It is necessary to conduct restructuring by establishing fiscal regulations on compulsory spendings, such as pension and health care, which are expected to rise, and then to adopt ex-ante and ex-post monitoring system to enhance the efficiency of expenditure.
   
• As for tax exemption and reduction, it is necessary to expand the tax-base source by strictly managing the scope and level based on assessment and confirming if initial objectives are still meaningful.
   

□	In addition, it is recommended to continue efforts to improve the system so as to restore fiscal soundness and improve the rationale of fiscal expenditure.

• While explicitly specifying fiscal rules in the national financial management plan, it is necessary to adopt a system which evaluates and monitors the performance and outcomes of the plan in a post-feasibility manner.
   
• As a way to improve fiscal sustainability, it is necessary to periodically release a long-term fiscal outlook report which takes into account low fertility rate and population aging.
   
• It is necessary to strengthen the National Assembly-level control on a possible outbreak of unexpected fiscal burdens by revising and enacting the National Assembly rules related to legislation associated with fiscal expenditures.
   

□	Meanwhile, it is necessary to eradicate the concerns over the stability of public corporations and the potential debts of the government by managing the debts of public corporations with efficiency and redefining their roles.

• Debts of public corporations are rapidly increasing although their sales volume and the rising pace of assets are considered, but the financial sustainability indicators of major public corporations, such as the ratio of net profit to net sales, appear to decline continually.
   
• It is recommended to achieve following: detailed disclosure of financial statements of public corporations, voluntary de-leveraging, estimation of costs for policy missions, and actualization of public fares.

 

　

2. Monetary Policy

□	The monetary policy needs to work toward normalizing the low interest rate policy stance, considering the changes in economic conditions, such as the possibility of rising inflation in the future.

• Now, there is a growing concern over potential negative effects of low interest policy stance which has remained unchanged despite the steady economic recovery. This, combined with growing structural inflationary pressure calls for attention to the possibility of price instability.
  
  - Given the overall recovery pace of the economy, the aggregate demand pressure is highly likely to continue rising for a while.
  
  - Furthermore, downside factors of commodity prices are possibly going to diminish at a gradual pace as the declining trend of foreign exchange rate moderates. The international oil prices are on the rise, indicating that factors for the price instability still exist on the supply side.
   
• Under such conditions, the monetary policy needs to be set toward preemptive approach on the possibility of price instability by normalizing the policy stance of low interest rates.
  
  - Considering that it takes some time for a change in policy interest rate to bring visible outcomes, it would be effective that preemptive responses are taken for price stability before a pick-up in inflation becomes apparent.
  
  - In particular, a rapid rise in the policy interest rate could cause unnecessary impacts on the economy, thus it would be desirable to promote the normalization of the low interest rate policy stance as a way to increase interest rates at a gradual pace.

 

 

3. Financial Policy

□	The financial policy needs to be implemented focusing on normalizing the function of the financial market toward efficient resource allocation.

• A number of various financial policies adopted to counter the global financial crisis are evaluated to have made important contributions to stabilizing the financial market.
   
• At the same time, it is necessary to consider the possibility of side effects from providing greater financial support to SMEs could have hindered the basic functions of financial market such as efficient resource allocation and also delayed the de-leveraging in the corporate sector.
   

□	To normalize the functions of the financial market, it is necessary to terminate various financial assistance temporarily adopted to counter the crises, to push for active restructuring of the underperforming sectors, and to streamline the system of policy finance.

• When there are excessive guarantees or liquidity provision even during the stable period in the financial market, there could be problems of distortion in price formation in the financial market and undermining the overall economic efficiency and growth potential.
   
• It is necessary to understand that the loss from underperforming sectors is an unavoidable step when pushing for active restructuring measures and securing long-term stability.
   
• Meanwhile, as an effort to promote the medium-to-long term efficiency in the financial market, it is necessary to conduct rigorous performance evaluations of policy finance by firmly establishing its roles and streamlining the system based on the assessment.

 

 

4. Labor Market Policy

□	It is necessary for the labor market policy to focus on establishing a medium-to-long term employment strategy so as to firmly connect the recent recovery pace of employment to stable creation of jobs.

• The employment of daily and non-wage workers continues to remain sluggish despite the recovery of overall employment, suggesting that employment conditions have not been improved for workers in the disadvantaged groups.
   
• Therefore, the employment policy for the future needs to shift the focus on short-term job creation to counter the crisis towards enhancing the mid- and long-term stability of the labor market by improving the employment of the disadvantaged.
   

□	Meanwhile, to improve the effectiveness of mid- and long-term employment strategy, it is necessary to accurately identify labor supply capacity and labor demand of the economy through efforts such as systemizing the statistics of status of foreign employees working in Korea.

• It is critical to make accurate estimation regarding the overall status of and outlook for human resources, including foreign workers, in order to establish a medium-to-long term employment strategy and implement them effectively.

 

제 1 부 국내외 경제동향

　Ⅰ. 국내경제 동향
　　1. 국내총생산
　　2. 경 기
　　3. 소 비
　　4. 설비투자
　　5. 건설투자
　　6. 수출입 및 국제수지
　　7. 노동시장
　　8. 물 가
　　9. 금융시장
　　10. 재 정

　Ⅱ. 세계경제 동향
　　1. 요 약
　　2. 주요 국가별 경제상황
　　3. 환율 및 금리
　　4. 원자재와 반도체 가격

제 2 부 경제전망 및 정책방향

Ⅰ. 현 경제상황에 대한 인식

Ⅱ. 2010~11년 국내경제 전망
　　1. 대외 여건에 대한 주요전제
　　2. 2010년 국내경제 전망
　　3. 2011년 국내경제 전망

Ⅲ. 정책방향
　　1. 재정정책
　　2. 통화정책
　　3. 금융정책
　　4. 노동시장정책

제 3 부 경제현안 분석
　　건설부문의 재무건전성 악화에 대한 평가
　　최근 우리나라 최근 우리나라 물가의 특징 및 정책적 시사점