Finance minister defends spending, fiscal state

Minister of Economy and Finance Hong Nam-ki dismissed concerns about the country’s fiscal health and next year’s record-high budget, stressing the need for increased spending to stimulate a slowing economy.

Under a budget proposal for next year unveiled last Thursday, the government will spend 513.5 trillion won ($424.2 billion) to stimulate the economy, but due to slowing tax revenues, it will rely more on issuing bonds.

Hong defended the government’s plan by comparing Korea’s fiscal conditions to other member countries of the Organisation for Economic Cooperation and Development.

“Our debt-to-GDP ratio will be at 39.8 percent [next year], however, [the average for] other economies under the OECD is at 110 percent,” said Hong on a talk show on local broadcaster KBS on Sunday. “In an absolute scale, our fiscal health is very stable.”

“We should be more concerned about the pace and rate of the rise of government debt.”

The government plans to issue 60.2 trillion won worth of bonds next year to make up for tax shortages, compared to 33.8 trillion won worth of bonds this year. Under a long-term fiscal plan also unveiled last week, government debt is expected to rise to 1,061.3 trillion won in 2023 from this year’s 740.8 trillion won, increasing this year’s debt-to-GDP ratio of 37.1 percent to 46.4 percent in 2023, according to the Finance Ministry.

Hong stated difficulties in reaching the government’s target for economic growth in deciding next year’s budget.

The central bank slashed its forecast for economic growth this year by 0.3 percentage points to 2.2 percent in July.

BY CHAE YUN-HWAN [chae.yunhwan@joongang.co.kr]