S. Korea must continue fiscal expansion for recovery: gov't report

By Koh Byung-joon
SEOUL, July 3 (Yonhap) -- South Korea needs to maintain its fiscal expansion to
spur an economic recovery as the economy remains sluggish despite improving
indicators, a government report said Friday.

"While financial markets are stabilizing and output, consumption and investment
are recovering, overall economic conditions still remain in a slump," the Finance
Ministry said in its monthly economy-assessment report.
The government assessment comes amid growing optimism that the economy might be
bottoming out and indeed may have already hit its lowest point amid improving
indicators.
The report said that industrial output shrank 9 percent in May from a year
earlier but rose 1.6 percent from a month earlier, marking the fifth consecutive
month-to-month expansion.
Consumer good sales jumped 5.1 percent in May from a month earlier thanks to a
hike in sales of automobiles driven by tax benefits.
Facility investment in the same month also rose 16.7 percent over the same
period, the first month-to-month growth since September 2008, according to the
report.
Exports dropped 11.3 percent in June from a year earlier but the downturn slowed
from a 28.3 percent contraction in May, according to the report.
Thanks to the eased downturn in exports, the report forecast that the nation's
industrial output in June will recover further.
The labor market, however, remains sluggish as companies are reluctant to hire
workers due to lingering uncertainty, the report noted. The jobless rate was
unchanged at 3.8 percent in May but job losses rose to 219,000 from 188,000
reported a month earlier.
"The economy has been recovering since the start of this year but the private
sector still doesn't have the capacity to rebound on its own (without government
support)," the report said.
"We need to maintain our expansionary economic policy stance aiming to create
jobs and carry out efforts to stabilize the livelihood of ordinary people without
a hitch, while closely monitoring worrying factors in the real estate market," it
added.
kokobj@yna.co.kr
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