Economic policymakers in the government seem to be pinning their hopes on further boosting domestic demand to reach next year’s gross domestic product growth target of 3.3 percent.

The framework of economic policies for 2016, which is to be unveiled later this month, is seen to focus on keeping an upward trend in domestic consumption and supplementing fiscal stimulus put into practice this year.

An official at the Ministry of Strategy and Finance said a diverse range of measures aimed at ramping up domestic demand and accelerating structural reforms would be included in the policy outline.

The ministry is particularly intent on increasing consumer spending. Buoyed by the results of a government-led nationwide sales promotion event named Korea’s Black Friday in October, MOSF officials are considering holding it twice a year on a regular basis with the participation of more manufacturing companies.

Their efforts to boost domestic consumption may be seen as inevitable to shore up Korea’s sluggish growth with its exports expected to continue to drop in the coming year amid a slump in global trade.

Some commentators here express a critical or skeptical view of the policy direction taken by the economic team led by Finance Minister Choi Kyung-hwan, noting it contrasts with an emphasis put by Japanese Prime Minister Shinzo Abe’s Cabinet on wage hikes to help increase household income and spending.

Japanese media has reported the Japan Business Federation plans to urge its member companies to agree on substantial pay hikes in next spring’s labor-management negotiations. This move comes in response to Abe’s earlier call for corporate cooperation in realizing a virtuous economic cycle in which growing incomes boost consumption and thus industrial output.

In another measure aimed at strengthening consumer spending, the Abe administration is pushing to raise the minimum wage by 3 percent on average each year.

To help ease burdens on businesses and boost their competitiveness, it is also moving to reduce the effective corporate tax rate from the current 32.1 percent to below 30 percent as early as next year.

Raising wages is an urgent task for Abe’s administration eager to boost consumer spending, which is seen as critical to bolstering domestic demand to prevent the economy from being dragged deeper into yet another recession.

Korea’s economic policymakers may say they have already tried to do whatever was needed to bring higher incomes to households.

Since taking office in July last year, Finance Minister Choi, who concurrently serves as deputy prime minister for economic affairs, has prodded companies to raise wages of their employees and increase dividends for their shareholders by giving tax benefits or incentives.

These efforts, however, have so far come to little fruition in raising wages. According to figures from the Ministry of Employment and Labor, wages for regular and temporary workers increased by 2.3 percent and 0.6 percent in real terms from a year earlier in the first half of this year.

“As the income-driven growth policy has resulted in little effect, government policymakers are now resorting to boosting consumption, which may be seen as the last resort,” said Cheong In-kyo, professor of economics at Inha University.

Critics note current efforts to shore up growth by increasing domestic demand are set to be limited by rising household debt that is about to reach 1.2 quadrillion won ($1.04 trillion).

According to data from the Bank of Korea, the ratio of household debt to disposable income in the country exceeded 160 percent last year, far above the corresponding numbers for other advanced economies, which mostly remained under 130 percent.

Analysts indicate pushing to boost consumer spending without a substantial rise in disposable income will only exacerbate the household debt problem, which is singled out as the greatest risk factor for Korea’s economy.

Government policymakers need to take a scrupulous look at measures being taken by the Abe administration to see whether they should go the extra mile in helping increase household income, economists say.

They also indicate the economic policy outline for 2016 should include broader and more specific measures to speed up deregulation and structural reform, which they note will eventually hold the key to creating more jobs and increasing wages.

By Kim Kyung-ho (khkim@heraldcorp.com)