PressRelease

MinistryofEconomyandFinance

Embargo:

ReleaseDate:January4,2023

ContactInformation:Lee,SeungHan(044-215-2710/EconomicPolicyDivision)

2024ECONOMICPOLICYDIRECTIONS

I.Background

TheKoreangovernmenthasmadeeveryefforttoovercomethecompoundingglobalcrisesandrestructuretheframeworkofeconomicpolicies.Tobespecific,thegovernmentproactively

respondedtotheglobaleconomiccrisis,includingworldwidehighinflationandhighinterestrate.Inaddition,thegovernmenttransitionedtheframeworkofthecountry'seconomicpolicytowardsa

moreprivateandmarket-drivenapproachbyimplementingasoundfiscalpolicy,pursuingregulatory

innovation,andnormalizingrealestatetaxationandregulations.Notonlythat,theexportand

investmentfootholdofKoreancompanieshasbeenexpandedonthebackofthePresident'ssalesdiplomacy.

Asaresultofsuchpolicyendeavors,inflationhasbeenslowingdown,theeconomytransitioned

towardsarecoveryphasemainlydrivenbyexports,employmentremainedfavorable,andfinancialmarketvolatilityhaseased,suggestingthattheKoreaneconomyhasbeguntosettledown.

However,althougheconomicrecoveryisexpectedtoexpandmainlyinexportsin2024,theimpactofprolongedhighinflationandinteresthikesmayleadtoweakeneddomesticconsumptionandposeahardshiponpeople'slivelihoods.Furthermore,potentialrisksstillpersistinvulnerablespotswithregardtorealestateprojectfinancing(PF),householddebts,andmarginalcompanies.Underthesecircumstances,whilefocusingontheeconomicrecoverythatcanbefeltbythegeneralpublic,

meticulousmanagementofpotentialriskfactorsiscrucial.Inaddition,effortstoenhancethevitalityoftheKoreaneconomyandstrengthenresponsesystemsforfuturechallengesareessential.

I.2024Outlooks

Growth:Annualeconomicgrowthisprojectedtobe2.2%in2024,higherthan2023's

outlookof1.4%duetotherecoveryofglobaltradeandsemiconductorindustries.However,privateconsumptionisexpectedtobeconstrainedowingtoprolongedhighinflationand

interestratehikes,whiledifficultiesintheconstructioninvestmentsectorarepredicted.

Employment:Theeconomyisprojectedtoaddaround230,000in2024asin-personservice

jobs,whichsawasignificantsurgelastyear,normalize.Theemploymentrateisalsoanticipatedtocontinueitsupwardtrend.

Consumerprice:Theannualconsumerpriceincreaseisexpectedtosignificantlydeceleratetoaround2.6%comparedtolastyear's3.6%,primarilyduetostableinternational

commodityprices;however,itisforecastedtosustainaround3%throughoutthefirsthalfoftheyear.

Currentaccountbalance:Thecurrentaccountsurplusispredictedtogoupto$50billion,ahugeincreasefromthepreviousyear'ssurplusof$31billion.Whilesurplusesingoods

MINISTRYOFECONOMYANDFINANCE

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MINISTRYOFECONOMYANDFINANCE

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balanceareexpectedtoconsiderablygrowowingtoexportrebound,theserviceaccountisanticipatedtoseeadeficit,attributedtoasurgeinoverseastravel.

2023

2024

GDPgrowth(%)

1.4

2.2

Employmentgrowth(tenthousand)

-Employmentrate(%,15yorover)

32

62.6

23

62.8

Consumerprice(%)

3.6

2.6

Currentaccount(US$10million)

-Exports(y-o-y,%)

-Imports(y-o-y,%)

310

-7.4

-12.1

500

8.5

4.0

Ⅲ.TheframeworkofEconomicPolicyDirections

ThegovernmenthasdrawnupfourpolicydirectionsbasedonfourpillarsconstitutingFreedom,Fairness,InnovationandSolidarity,withanaimtoachieveeconomicupturnthatcanbefeltbypeopleandcarryoutstructuralreformstoenablesustainablegrowth.

Thepolicydirectionsfocuson1)Supportingtherecoveryofpeople’slivelihoods2)Managingpotentialrisks3)Materializingadynamiceconomy,4)Accompanyingtheyoungtowardsa

sustainablefuture.

One:Supporttherecoveryofpeople’slivelihoods

1-1.Achievepriceandpeople’slivelihoodsstability

1)Makeaconcertedandcontinuingeffortacrossministriestoachievea2%inflationtargetearlierinthefirsthalfoftheyear.

-Expandthebudgetforpricecontrolmeasuresby1.8trillionwoncomparedtothatofthepreviousyear,totaling10.8trillionwon.

-Exemptandreducetariffsfor21fruititems,allowingfortheswiftintroductionof300,000tonsinthefirsthalfoftheyear(tariffassistanceworth135.1billionwon).

-Holdpublicutilityfeesunchangedinthefirsthalfoftheyearandfurtherprovide

incentivestopublicagenciesbasedontheircontributionstomaintainpricestability.

2)Reduceburdensofessentialexpensescloselylinkedtopeople’sdailylivesincludingeducation,healthcare,finance,andtaxes.

3)Stabilizetherentalhousingmarketbyrespondingtotheriskssuchasreverse-jeonse1orjeonsefraudaswellasenhancehousingsupportforpeopleandthevulnerable.

-Setupastrongerprotectionschemefortenantsinmulti-familyhouses,expandpublicleasesystems,andstrivetoeliminateblindspotsinjeonsefraud.

-Providevarioustypesofhouses,shoreupsupportforjeonseloanstargetingyouthandhouseholdswithbabies.

1Jeonsereferstolump-sumdepositswithnomonthlypayments

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1-2.Supportsmallbusinessesandvulnerablesocialgroups

1)Reducethethreemajorburdensonsmallbusinesseswhilesupportingtheirsalesrecoveryandenhancingcompetitiveness.

-Promoteasupportpackagetorelievethethreeburdens(energybills,highinterestrates,andtaxation)onsmallbusinessesbyinjectingpublicfinancesandadjustingtaxation

criteria.

-Buttresssmallbusinesses’salesrecoverybyexpandingeligibilityfortheNewStartFund.

-Bolstercompanies’fundamentalcompetitivenessbydevelopingrelevantstrategiesincludingthe‘measurestoimprovecompetitivenessofSMEs’inthefirstquarterof2024.

2)Strengthentailoredsupportforvulnerablesocialgroupssuchastheelderly,disabled,and

low-incomepeopleandshoreupsupporttoprovidemorejobopportunitiesforolderadults.

1-3.Accelerateexportreboundanddomesticconsumption

1)Increasefinancialandtaxincentivestostimulatedomesticconsumption,focusingonboostingeco-friendlyconsumptionsuchasreplacingoldvehiclesandadoptinghigh-efficiencydevices.

2)Promoteinboundtourismbyimprovingvisasystemsandenhancingforeigntravelers’convenience,particularlyintransportation,paymentsystemsandduty-freeshopping.

3)Assistinreachinga$700billionexporttargetanda$57billionoverseasconstructioncontractstargetfor2024.

-Buttresstheearlyachievementofthe$700billionexporttargetbysteppingup

assistanceforexportingcompaniesandprovidingtradefinanceworth355trillionwon.

-Acceleratetheachievementofthe$57billiontargetinoverseasconstructioncontractsinthefieldofinfrastructure,defense,andnuclearpowerplantsbyprovidingexpanded

legalcapitalthroughtheExport-ImportBankofKorea.

-Establishmeasurestomaterializeachievementsinsalesdiplomacyandstrengthenbilateralandmultilateraltradecooperationtofurtherexpandexportdestinations.

4)Underpinearlyinvestmentreboundthroughspecialsupportintaxation,financing,andaddressingobstacles.

-RaisetaxincentivesforfacilityandR&Dinvestments.

-Injectfacilityinvestmentfundsworth52trillionwon,thelargestamountever.

-Reviewdelayedinvestmentprojectsandpushforwardaswiftexecutionledbythepan-governmental‘regionalinvestmentsupporttaskforce’.

5)Enhancesupportforattractingthelargest-scaleforeigninvestmentever($35billion)andboostcompanies’reshoringbyraisingtheupperlimitofsubsidies.

1-4.Revitalizelocaleconomiesandconstructionindustry

1)(Regionalhubs)Createfourmajorspecialpurposezones,includingtheOpportunityand

DevelopmentZone,EducationDevelopmentZone,UrbanInnovationDistrict,andCulture

Zone,aswellasdesignatethreemoreglobalinnovationzonesinadditiontotheexistingfourwithanaimtofosterdeeptechunicorncompanies.

2)(Shrinkingcities)Pushforwardthe‘threekeyprojectsforrevivingshrinkingcities’.

-Expandincentivesforhomeownershipandpropertytransactionsasameansofincreasinglivingpopulation.

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-Buildtourisminfrastructuretoattractvisitors.

-Boostresidentpopulationbypromotingtheinfluxofforeignersanddevelopingstrategiestoaddressruraldepopulationtocounteractregionalextinction.

3)(Constructioninvestment)Stepupall-encompassingsupportmeasurestofacilitateregional-centricconstructioninvestment.

-StrengthentheroleofthepublicsectorthroughtheearlyexecutionofSocialOverheadCapital(SOC)projects;improveinvestmentclimatethroughtemporaryregulatoryreliefsoastoalleviatetheburdenonbusinessactivitiesamidhigheconomicuncertainties.

-Furtherexpandhousingsupplyinthepublicsectorandpushforearlyconstructionofthethirdnewtown.

Two.Managepotentialrisks

2-1.PursueasoftlandingofrealestatePF

-PromoteasoftlandingofrealestatePFbyproactivelyinjectingliquidityintothemarketincludingapromptexecutionofaliquiditysupplyprogramworth85trillionwon.

-AddressobstaclesPFbusinessesfaceanddrivetherestructuringofunderperformingPFprojects.

-ConductfundamentalinstitutionalreformstopreventtherecurrenceofrealestatePFliquiditycrisis.

-Promptlydevelopfollow-upmeasuresforlegislationtasksforstabilizingtherealestatemarketinthefirsthalfof2024.

2-2.Managehouseholddebts

-Keeptheannualgrowthrateofhouseholddebtwithinthenominalgrowthrateandstrivetokeepitwithin100%ofGDPby2027.

-Raisetheproportionoffixed-ratemortgageloanstoaround50%by2027.

2-3.Securesupplychainsstability

-Establishpan-governmentalresponsesystemsbasedontheFrameworkActonSupplyChainaswellaslaunchandutilizethesupplychainsstabilizationfund.

-Raisefinancial,taxandfiscalincentivestodiversifysupplychains.

-Expandastockpileofkeyrawmaterialswhilediversifyingstockpilingmethodsaimingtosecureresourcesecurity.

2-4.Maintainfinancialstabilityandfiscalconsolidation

1)Strivetostabilizefinancialandforeignexchange(FX)markets.

-Adjusttheissuancevolumeandtimingofblue-chipbondstoimprovebondsupply.

-ImplementtheImprovementMeasuresforFXMarketStructureinearnesttoraisetheaccessibilityoftheonshoreFXmarket.

2)Supervisefinancialinstitutionssuchascommercialbanks,mutualfinanceandsavingsbankstomaintaintheirsoundness.

3)Providetailoredsupportformarginalcompanies.

-Strengthencreditriskassessmentinordertoproactivelymanagedistressedcompanies.

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-FacilitatevoluntarybusinessrestructuringbyintroducingincentivesundertheSpecialActonRevitalizingCompanies.

-ImprovecorporaterehabilitationproceduresforSMEsandvulnerablebusinesses.

Three.Materializeadynamiceconomy

3-1.Shoreuptheinnovationecosystem

1)Driveprivatesectorinnovationbyintroducingboldderegulationmeasures.

-Improvethethreemajorlanduseregulations-developmentrestrictionarea,agriculturalland,andmountainousareas.

-Reviewandimprove‘killerregulations’intensectorsincludingcertification,

procurement,environmentalemissions,etc.,ledbythetaskforceforkillerregulationreform.

2)Acceleratethefosteringofkeyadvancedindustries.

-Promptlycreatetheadvancedindustryclustersandprovidetailoredsupportforeachstageofthecreation.

-IntensivelyfostertheHigh5+—semiconductor,secondarybattery,biotech,futuremobility,hydrogen—alongwiththeprovisionofpolicyfinancetotalingover150trillionwonforthenextthreeyears.

3)CarryoutacomprehensiveR&Dinnovationforaleaptowardbecomingaglobalhubinscienceandtechnology.

-Boostautonomyinthegovernment-fundedresearchinstitutes’humanresourcesandbudgetmanagement.

-SignificantlyincreaseglobalR&Dinvestmentsinadvancedindustries(0.5trillionwon→1.8trillionwon)toexpandresearchopportunitiesforyoungscientistsandstrengthentheircapabilities.

-SubstantiallyraiseincentivestoattractglobalR&Dcenterswithanaimtostimulateprivatesectorinvestment.

-Improvethepreliminaryfeasibilityassessmentsystemtocreateamorechallengingandoutcome-drivenR&Denvironment.

4)Buildagrowthladderforsmallandmedium-sizedenterprises(SMEs)andenhancetheventureandstart-upecosystem.

-EstablishrelevantlawsandbasicplansforenhancingproductivityinSMEs,andassistthemtogrowintomiddlemarketenterprisesbyextendingtheperiodoftaxbenefits(3→5years).

-Developanewgrowthroadmapforventureenterprisesin2024,promoteinvestmentsinfundoffundsandfurtherattractventureinvestments,whilestimulatingM&Aactivitiesthroughderegulationandtaxationsupportmeasures.

5)Intensivelynurturepromisingserviceindustries.

-Strengtheninfrastructurefortheserviceindustry,suchassecuringdemandbaseandprofessionalmanpower,andsetupasupportsystem.

-Establishstrategiesforfosteringpromisingservicesectorsincludingcontent,finance,biotechandhealthcare,tourism,andfood.

-Pushforthelegislationofthefundamentalactonthedevelopmentofserviceindustries.

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3-2.Ensurefairopportunities

1)Buildupmarketdynamismbyrelaxingrestrictiveregulationsthatlimitcompetitionincludingentrybarriers.

2)Preventtheabuseofamonopolisticordominantmarketpositionbydevelopinginstitutionalmeasuresandfightunfairorillegalpracticesthroughtightenedgovernmentresponses.

3)Designafaircompensationsystembasedonjobrolesandperformancetoadvancethelabormarket.

-Formulatemeasurestoaddressdualstructuresofthelabormarketinthefirsthalfof2024.

-Developsupplementarymeasurestoimprovetheworkinghourssystemreflectingtheresultsofnationwidesurveysinthefirsthalfof2024.

4)DeepensolidarityacrosstheeconomybyexpandingcooperationbetweenlargeenterprisesandSMEsformutualgrowth.

3-3.Promotesocialmobility

1)Shoreuppolicysupporttopromotetheparticipationofyouthandwomenineconomicactivities.

-Raisethetargetfornewpublicsectorhirestoexceedthatof2023(22,000)

-Devisethe'measurestosupportwork-familybalance’inthesecondhalfof2024inanefforttoboostwomen'seconomicparticipation.

2)Ensurequalityeducationalopportunitiesforlow-incomepopulationsbyprovidinganeducationladdersuchastheexpansionofgiftededucationandnationalscholarships.

3)Eliminateblindspotsinemploymentandsocialsafetynets,aswellasstrengthenassistanceforrehabilitation.

-Drivereformsintheemploymentinsurancesystemtoadapttochangesinthelabormarket,andimprovetheunemploymentbenefitsystemtobemoreconduciveto

encouraginglabormarketparticipation.

-Strengthenjobtrainingsystemsandsupportforthosewhowishtogetbackontheirfeettomovetowardswork,whileincreasingregion-specificjobopportunities.

Four.Accompanytheyoungtowardsasustainablefuture

*Thevisionandmedium-andlong-termstrategyforfuturegenerationswillbepreparedin2024toproactivelyrespondtofuturechallenges.

4-1.Securefiscalsustainability

1)Maintainapolicystanceoffiscalsoundnessbycontinuouslypursuingthelegislationof

fiscalrules,inanefforttoeaseburdensonfuturegenerations.

2)Setupsustainablenationalpensionandhealthinsurancesystems.

-Prepareaspecificpensionreformplanbasedonanationalconsensus.

-Developthesecondcomprehensivenationalhealthinsuranceplan(2024-2028)withanaimtoincreasecoverageandraiseefficiencyinexpenditures.

4-2.Adapttodemographiccrisisandclimatechange

1)Conductafull-fledgedreformofforeignerpoliciestomeetglobalstandards.

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-Significantlyexpandtheinflowofforeignlaborbyapproximately100,000comparedtothatofthepreviousyear(172,000in2023→260,000+αin2024).

-Relaxvisaregulationsforforeignstudentsbyextendingthejob-seekervisaperiodaftergraduation(amaximumof2years→3years).

-Developmeasurestointroducespecialprovisionsonlong-serviceforeignworkers(non-