[EDITORIALS]Economy shackled by rulesThe government and the governing party are already talking about drawing up a supplementary national budget. Talk of additions to the budget came up during their consultations on Friday. The participants reportedly seemed determined to try anything to boost the economy, as economic growth dropped below 3 percent in the first quarter.
During his visit to Turkey, President Roh Moo-hyun said that our economy had recovered. Deputy Prime Minister and Finance Minister Han Duck-soo also declared recently that there would be no pump-priming policies for the time being. The Ministry of Finance and Economy has said that it would not review the possibility of a supplementary budget and that any review would not mean one would be implemented. But on Friday, the ministry reportedly agreed to consider creating a supplementary budget.
What’s the big deal with a supplementary budget if it boosts the economy? But would a supplementary budget really boost the economy? The government has already spent more than 66 trillion won ($66 billion), but we are still falling deeper into economic recession. It would be difficult to expect any major changes by spending a few more trillion won in the second half of the year.
At this point in time, it would be smarter to sit down and think about what is causing the economic slump. The economy has been dwindling lately because of a continuing slump in domestic demand coupled with a slowdown in exports. However, the fundamental reason for our economic slump lies in our inability to revive domestic demand. Most importantly, corporate investments are down. Despite having money, businesses are nervous about the future and are tied down with government regulations as well.
Additional government spending is not going to do the job. The supplementary budget spending last year and the early implementation of financial spending this year did nothing to help domestic demand. It is a terrible pity that every year the government presents a supplementary budget as the magic solution. The role of government spending in influencing the economy is limited. Instead of trying to revive the economy through spending, the government should lift restrictions and encourage businesses to invest.