The South Korean government on Monday downgraded its economic growth forecast for the year 2015 to 3.8 per cent from the 4 per cent it predicted in July, citing weak consumption and investment amid growing economic uncertainties in its statement.
This year's growth rate was also cut to 3.4 per cent from 3.7 per cent on account of a slower-than-expected economic recovery despite the government's expansionary policy moves.
Next year, the government plans to put stronger emphasis on structural reforms for improving the country's economic fundamentals. The reforms will centre mostly on the public sector, finance industry, education and labour market, the Finance Ministry said in its 2015 economic directives.
In general, South Korea will stick to its expansionary macroeconomic policy, the ministry said.
Highlighting such goals, Finance Minister Choi Kyung-hwan said in a meeting of economy ministers that the structural reforms would take precedence in 2015, with emphasis on changing the labour market.
"Countries like Germany, Britain and the Netherlands that pushed forward labour market reforms in a steady manner have persistently outperformed those that have not, in such areas as growth and distribution of wealth," he said.
He added that the aim of reform is to enhance flexibility while at the same time ensuring social security.
Choi claimed money was not flowing to where it is needed, and that this congestion is hindering growth.
The minister said there was a pressing need to breath new vibrancy into the country's financial sector.
Regarding the debt-ridden public sector, the government plans to push ahead with public pension reforms and also mergers of public organisations.
Apart from reforms in the government employee pension programme pending in the National Assembly, the Finance Ministry said it plans to unveil plans for overhauling the pension funds for teachers and the serviced members next year.
Plus, the ministry will be assessing the performance and profitability of all public institutions to re-design their functions and organisations. As a result, there may be a massive shutdown in the public sector, or mergers of those seen to be showing overlapping or sluggish performances, officials said.
Fintech ― a convergence of technology and finance ― was also on the government's plate for next year's policy plans. The Finance Services Commission will be setting up support centers for fintech companies and ease relevant regulations.
Support for startups will also be continued up until next year. The regulations on venture capital will be eased, joint surety for startups will gradually be abolished, and the amount of loans for technology financing will rise by 500 billion won (S$600 million).