South Korean President Moon Jae-in’s government proposes to spend a record 471 trillion won (US$420 billion) next year, aimed at speeding up the economy by creating jobs, raising the minimum wage and prodding innovative growth.
The budget proposal calls for a spending increase of about 9.7 percent from last year’s initial budget, the biggest jump since the aftermath of the global financial crisis in 2009, the South Korean Ministry of Finance said in a statement yesterday.
Spending to create jobs will rise a record amount, while infrastructure spending will fall, it said.
Photo: EPA-EFE
Moon’s approval ratings have dropped to the lowest level since his election in May last year as the economy has run into headwinds.
He has vowed to be a “jobs president” and to create a fairer society, but has faced a backlash over an aggressive increase in the minimum wage that some blame for a hiring slowdown.
Both the government and Bank of Korea have trimmed their forecasts for economic growth this year to 2.9 percent from 3 percent. Employment has been rising but at a slower pace.
The jobless rate ticked up to 3.8 percent last month, according to Statistics Korea.
The central bank has held the benchmark interest rate at 1.5 percent since raising it from a record low in November last year.
The government is to emphasize the “active role of fiscal policy” in facing the nation’s economic challenges, including “extremely difficult” employment conditions, South Korean Minister of Finance Kim Dong-yeon said last week.
The budget proposal calls for spending a record 24 trillion won to boost employment, including creating more jobs for the elderly, the disabled and women, Kim said.
Some of that money will provide indirect support for job creation in the private sector, he said.
To nurture innovative growth, the government plans to expand investments in research and development by 3.7 percent to 20 trillion won.
The government’s spending plan might support private consumption and will likely help mitigate any downside risks to economic growth next year, said Park Seok-gil, an economist at JPMorgan Chase & Co.
While Kim drew a somber picture of the economy, Moon on Saturday said the country was on the right economic path.
“The quantity and quality of jobs has generally improved,” he said.
The government’s revenue would increase by 7.6 percent to 481 trillion won next year, thanks to higher corporate tax revenue, the finance ministry said.
The government’s debt is expected to be 39 percent of GDP, it said.
The government plans to issue up to 97.8 trillion won of bonds next year.
Of the total, 57.1 trillion won will be used for redemption payments. The remainder will be net issuance.
Moon’s administration plans to increase spending by an average of 7.3 percent per year between this year and 2022, and forecasts revenue to rise by an average of 5.2 percent annually.
The government projects a fiscal deficit of about 3 percent and government debt of about 40 percent of GDP during the period, the ministry said.
The government is to submit the budget proposal to parliament early next month.
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