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SEOUL: South Korea should focus on job creation and boosting its growth potential as it grapples with high inflation and declining domestic demand, the finance ministry said Thursday.
"Top priority should be placed on stabilising the livelihoods of ordinary people who suffer from rising prices. At the same time, efforts should be made to create jobs and boost the growth potential," it said in a monthly report.
Local financial markets have been spooked by concerns of a big capital flight this month, when bonds worth US$6.71 billion held by foreigners mature.
The Korean won closed Wednesday at 1,148.5 to the dollar, the lowest level since October 2004.
Government officials and the International Monetary Fund have dismissed fears of a repeat of the 1997 fiscal crisis, saying foreign exchange reserves of some US$243.2 billion are enough to meet liabilities.
Amid a global economic slowdown, the government is eager to boost domestic demand. The finance ministry this week announced plans for tax cuts to stimulate private consumption and corporate investment.
The ministry report said private-sector consumption declined 0.1 per cent in the second quarter from three months earlier, marking the first drop in four years.
Consumer confidence fell to the lowest level in almost eight years in July.
Corporate investment also remained weak. In the second quarter, corporate spending on facilities grew a mere 0.8 per cent year-on-year compared with a 1.4 per cent gain during the first quarter.
Exports remained strong. The nation exported a total of US$37.39 billion worth of products in August, up 20.6 per cent from a year earlier.
But imports jumped 37 per cent to US$40.62 billion due to higher oil prices, resulting in the largest trade shortfall since January this year.
- AFP/yb
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