S. Korea's finance minister says 3.8 pct growth possible for 2015

South Korea's top economic policymaker said Thursday that 3.8 percent annual growth is attainable for 2015, despite various challenges.

"If risks are properly managed, the country can use the drop in international crude oil prices to its advantage in trade," Finance Minister Choi Kyung-hwan told lawmakers of the National Assembly's Strategy and Finance Committee. He added that free trade agreements reached with large trading partners will further affect investment that is linked to growth.

He pointed out that starting in the second half of last year, South Korea lowered its key rates and engaged in expansionary fiscal policies to prop-up growth.
  

"Such measures are expected to take effect," said the official, who doubles as deputy prime minister, stressing that there is bound to be some lag time between policy implementation and results.
  

Choi explained that the government downgraded growth for 2015 by 0.2 percentage point to reflect adjustments made by the International Monetary Fund and other agencies that predicted slower growth around the globe.
  

He countered claims that the economy as a whole was losing steam.
  

"Gains are faint yet the economy as a whole is showing signs of improvement," the minister said.
  

Some economists have charged that the government is still painting too rosy a picture of the country's economy, despite the downgrade. The Bank of Korea lowered the country's growth estimate from 3.9 percent to 2.4 percent in January, while foreign investment banks forecast growth of 3.6 percent.
  

The policymaker dispelled worries of deflation, saying that what concerns him the most was not that the country may be actually locked in a deflationary spiral, but the public perception that it is.
  

"Technically, the country is in disinflation and not deflation," he said.
  

Deflation refers to inflation falling into minus territory, but in the case of South Korea, consumer prices have been growing steadily in the mid-1 percent range for the past three years, Choi said.
  

"The reason why inflation numbers have fallen off is more supply-oriented than any serious deficiencies in demand," Choi said.
  

The finance ministry claimed several times in the past that weak energy prices were affecting consumer price gains.
  

The minister, however, conceded that while expansionary policy measures will be maintained, there is a need to carefully check household debt levels that poses risks for the country's financial well-being.
  

Choi then touched on the controversy surrounding the need to raise taxes to meet greater social security spending. The issue has become the center of debate in political circles after the head and the new floor leader of the ruling Saenuri Party both called for a reassessment of the incumbent Park Geun-hye administration's goal of meeting greater spending needs without raising taxes.
  

"Taking into consideration present circumstances, now is not the time to discuss raising taxes," he argued.
  

On overseas developments, the official emphasized that the government is keen to monitor international financial market volatility.
  

"Coming into this year there has been a rise in market fluctuations," he said, although adding that the Korean won has not appreciated against the U.S. dollar.
  

He said while, the government has no plans to introduce the so-called Tobin tax that would slap taxes on currency transactions, it is preparing for all contingencies related to the possible outflow of capital that could destabilize the economy. (Yonhap)