S. Korea faces inflation, tough labor market: Yoon

SEOUL, June 1 (Yonhap) -- South Korea is still faced with challenges in tackling inflation and tough labor market conditions, the nation's outgoing finance minister said Wednesday, indicating that they are among the main issues that his successor needs to focus on as the top economic policymaker.
In a farewell speech to his employees, Yoon Jeung-hyun added that another top priority is to strengthen the nation's fiscal soundness, cautiously expressing opposition to some lawmakers' pursuit of expanding free welfare programs.
Yoon will be replaced by Bahk Jae-wan, a former presidential advisor, who was designated as new finance minister last month. He will take office on Thursday.
"I still feel burdened when it comes to inflation, jobs, growth engines and other uncompleted tasks," Yoon said. "In particular, given that soaring inflation makes the livelihood of low- and mid-income earners tougher, I feel really sorry to those people."
His remarks come as South Korea has been grappling with growing inflationary pressure caused by many external factors such as higher crude oil and commodity prices. Outbreaks of foot-and-mouth disease also played a role in driving up food prices here by causing the massive slaughter of livestock.
Price stability has been a top priority for the Lee Myung-bak government, prompting the president earlier this week to declared a "war" against inflation. But the government has been losing the battle due to many "uncontrollable" factors such as spiking energy prices.
Yoon was inaugurated as finance minister in February 2009, when the nation was in the middle of chaos prompted by the global financial turbulence and resultant economic downturn.
Falling consumption, sluggish corporate investment and a frozen labor market were all weighing on the economy that depends heavily on trade for its growth. Financial markets also suffered daily fluctuations, spawning speculation that the nation might not be able to pull out of the crisis for the time being.
On his first day in office, Yoon approached the market with "honesty," he said at that time, adding that the economy might contract in 2009, a sharp downgrade from his predecessor's prediction of 3 percent growth. He also came out with a 30 trillion won supplementary budget to boost the slumping economy.
Yoon said that such active and preemptive measures based on "communication with the market" helped turn things around, laying the groundwork for a faster-than-expected economic recovery in the years to come.
In particular, he cited the successful hosting of the Group of 20 summit talks in November last year as a great chance for the nation to join the world as a "rule maker" after its decades-long status as a "rule taker" in the global community.
He, however, noted that the nation is facing challenges going forward. Among other things, Yoon emphasized the importance of keeping fiscal soundness, citing some advanced nations gripped by deepening sovereign debt crises.
When the government is under pressure from the political community to expand free welfare, Yoon said, the finance ministry should be a "final seawall" to prevent the nation's fiscal soundness from being hurt.
"Given that the ultimate goal of economic development is to enhance the quality of life of people, it is very important to expand welfare," Yoon said. "Still, the issue of welfare expansion should be pursued within the economic capacity and based on mid- and long-term framework for resources distribution."
"The finance ministry could be isolated in its fight against the recently spreading mantra of free welfare. We should not be afraid of the isolation and instead should serve as the last fiscal seawall," he added.
kokobj@yna.co.kr