SEOUL (Thomson Financial) - South Korea s new self-styled "economy president", Lee Myung-Bak, will face a baptism of fire as he struggles to boost growth in the face of global financial jitters and soaring raw material prices, analysts said.
Lee, the country s first president from a business background, will be sworn in Monday.
He has presented a slew of pro-business policies, including deregulation, privatization, tax cuts and a better climate for foreign investors.
Lee s key "747" pledge is to raise growth to 7 percent during his single five-year term. He wishes to lay the foundations for an increase in per capita income to 40,000 US dollars within a decade, and to make South Korea the world s seventh-largest economy.
Lee was credited with helping to drive South Korea s earlier meteoric growth when he was chief executive of Hyundai Engineering and Construction.
South Koreans count on this background and his "can do" reputation as mayor of Seoul. As mayor, he drove through a popular project to open up a scenic stream through the heart of the capital.
But analysts say Lee will be hobbled by global financial uncertainty, high raw material prices, including oil prices, and a slowing US economy.
"A certain degree of skepticism greets these plans, given that the election of Lee s predecessor generated a similar reform buzz, but he failed to deliver," Daniel Melser of Moody s Economy.com said in a recent report.
"The new president is likely to face similar difficulties, and our hopes for substantive reform are not high."
The installation of a leader who advocates a hands-off approach will at least end some of the ad hoc economic interventions by the previous government, he said.
"But this will do little in the short run to stem the slide in growth and acceleration in inflation," Melser said.
Even before his inauguration, Lee downgraded this year s growth target to 6 percent. The central bank predicts growth will slow to 4.7 percent this year from 4.9 percent in 2007.
Annual inflation jumped to 3.93 percent in January, the highest rate for 39 months.
Daunting task
The success of Lee s reforms also depends on his conservative party winning a majority in the April parliamentary elections, said Yonsei University economics professor Lee Doo-Won.
The new president will be in a better position than his predecessor, Roh Moo-Hyun, since many people believe in his ability somehow to revitalize the economy, he said.
"However, prospects are not so bright."
The most daunting task for the new president, the professor said, is to follow through on his pledge to create about 600,000 new jobs every year.
"Public discontent will grow if this goes wrong."
Last year about 300,000 jobs were created but companies worry that their performance will be undermined by rising raw material prices, Lee Doo-Won said.
Resource-poor South Korea, the world s 13th-largest economy, posted a current account surplus of 6 billion dollars last year.
The central bank predicts the account will register a shortfall of 3 billion dollars this year, which would be the first deficit since 1997.
"Lee s business-friendly policy is expected to invigorate investment," said Hanyang University economics professor Yun Won-Cheol.
"But it s difficult for him to raise growth as he pledged due to uncertainty in global economies.
"High oil prices and a slow US economy may slow our economic recovery."
Yun was also cautious about a 14 trillion won cross-country canal project proposed by Lee as "the environmental revitalization of the 21st century".
"Many experts agree the new president s economic policy is mostly realistic, but they have doubts about the canal project," he said.
(1 US dollar = 952 won)
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