Posted on 02/29/2008 2:09:32 AM PST by bruinbirdman
South Korea’s new government on Thursday laid out plans temporarily to cut fuel taxes by 10 per cent and extend tax concessions for new corporate investments in an effort to boost flagging economic growth.
Lee Myung-bak, who was sworn in as president on Monday, was elected in December on the back of promises to boost the economy and has pledged tax cuts as part of that.
The finance ministry outlined plans that, pending cabinet approval, would cut fuel taxes for 10 months from March and extend tax benefits for companies investing in production facilities by a year. The measures would save taxpayers an estimated 3,300bn won ($3.5bn), the ministry said.
On Thursday South Korea posted its biggest monthly current account deficit in almost 11 years as higher oil prices drove up import costs.
The current account recorded a preliminary deficit of $2.6bn in January, as imports jumped 31.1 per cent, outpacing a 15.4 per cent growth in exports.
Mr Lee has vowed to raise the country’s potential rate of growth to 7 per cent within a decade by increasing investment and boosting productivity. Since his election, however, he has had to clarify that he is aiming for actual growth of only 6 per cent this year, saying that global uncertainty would damp demand. But incoming finance minister Kang Man-soo this week had to lower even the 6 per cent target, as export growth is expected to slow amid the cooling global economy. Mr Kang forecast the economy to grow less than 5 per cent this year, as rising commodity prices threatened the economy.
“The external environment has deteriorated,” Mr Kang told parliament on Wednesday. “Among external risks, I’m most worried about rising commodity prices because rising oil is something beyond our control.”
Crude oil prices, hovering around $100 a barrel, are taking a toll on the Korean economy which is the world’s fifth-largest oil importer, purchasing 97 per cent of its energy needs from overseas.
Economists said the current account deficit could be temporary and may swing back into surplus when oil prices stabilise. But they expected Mr Lee would have difficulties attaining his growth target, given increasing risks such as rising inflation and worsening terms of trade.
The Bank of Korea is expected to come under greater pressure to cut interest rates to boost economic growth as it struggles to contain inflation stemming from higher oil and food prices. South Korea’s inflation accelerated to 3.9 per cent in January from a year earlier, the biggest increase in more than three years
Apparently, the South Korean government is smarter than ours.
That won’t work - ask Clinton and Obama.
NO, no,
Raise them as high as possible, just ask Minnesotans how well that works.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.