Deputy Prime Minister and Minister of Economy and Finance Gu Yun-cheol said South Korea will aim to meet its 2% economic growth target this year despite the prolonged war in the Middle East, which he said is adding uncertainty and inflation pressure.
Gu made the remarks to reporters on May 5 (local time) after attending the Asian Development Bank’s annual meeting in Samarkand, Uzbekistan, as well as the ASEAN+3 finance ministers and central bank governors meeting.
“Because the Middle East situation is changing so much, it is practically difficult to forecast growth, and the impact is significant,” Gu said. Still, he added, “I want to say we will achieve the 2% (growth) we promised at the outset.” He said investment banks’ forecasts are “much higher than 2%,” and said he would work closely with the new ADB president to meet the goal.
Gu also addressed inflation steps drawing attention amid high oil prices, including the government’s “oil price cap.” On when to maintain or end the cap, he said it depends on “how quickly the Middle East war situation changes.” “The best policy is for the Middle East to move to a peace system,” he said, but added that with uncertainty pushing oil prices above $100, the government would need to respond with a mix of policies if prices stay elevated. He said the government would watch inflation closely, citing the risk of broader price increases stemming from higher diesel and gasoline prices and fuel taxes.
Gu said South Korea’s fiscal management and policy response are earning trust from international organizations. He said he met with the International Monetary Fund’s deputy managing director, who assessed South Korea as “doing very exemplary work.” Gu said the IMF official highlighted improved tax revenue that allowed the government to repay 1 trillion won without issuing additional government bonds, and said South Korea has managed stability through policy coordination even as oil prices surged 50% — a rise that “even the United States” has faced, he said.
Gu was cautious about speculation over a second supplementary budget. “Right now, we need to focus on executing the first supplementary budget,” he said, adding that 26.2 trillion won has already been added and the priority is rapid implementation. He also pointed to the main budget, which he said is close to 730 trillion won, and said the government will concentrate on executing it.
On exchange-rate volatility, Gu said it would not be appropriate to comment on a specific level because the rate is determined by the market. He added that whether on the exchange rate, inflation or growth, the key point is how quickly the Middle East war stabilizes. If volatility persists, he said, the government will respond actively with a policy mix and work closely with the Bank of Korea, the Financial Services Commission and the budget office to limit economic disruptions.
Asked about the possibility of a currency swap with the United States, Gu said external changes — including a change in the chair of the U.S. Federal Reserve — mean the issue should be considered comprehensively, maintaining a cautious stance.
* This article has been translated by AI.
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