Choi brings forward some spending for stimulusIn a desperate move to boost a stagnant economy and anemic consumption and investment, Finance Minister Choi Kyung-hwan announced he will increase spending from the national budget for first half of year by 3 trillion won ($2.6 billion), following official data that showed some of the worst economic indices in the past decade.
Choi also said Korea will stimulate 7 trillion won of increased investment from public companies and the private sector.
At a meeting with economy-related ministers, Choi said the government should make more of an effort to spark the current economy, particularly after the youth unemployment rate hit its highest level in 16 years in February.
“Consumption is showing tepid recovery due to some structural problems such as the gridlock in wage negotiation,” Choi said. “Investment by private companies is not solid due to a lack of effective demand [in the domestic market].
“February’s very high youth jobless rate is raising concerns,” he said. “The duality in our labor market’s structure [between salaried and contract workers] is seen as a major obstacle for youth employment.”
According to Finance Ministry, the government will earmark 2 trillion won for “early execution budget spending” in order to immediately boost the economy. That raises first-half spending from 181.6 trillion won to 183.6 trillion won.
An additional 1 trillion won will come from a special budget of 46 trillion won allocated to boost the economy when Choi took office last year. As of last year, about 31 trillion won was spent from that so-called policy package and 5.5 trillion was supposed to be used in the first half of this year. Choi raised it by a little more than 1 trillion won to 6.6 trillion won.
The government will urge several state-run companies to invest 1.5 trillion won in the private sector, such as Korea Electric Power Corporation, which recently sold its headquarters in Samseong-dong, southern Seoul, for 10 trillion won, or other public companies benefitting from failing global oil prices, Choi said.
An additional 5.5 trillion won in investment will come from the private sector, Choi said.
Separate from early spending of the budget, improving regulations on private investment is also being planned, according to the ministry.
Additional ways to stimulate investment in private R&D will also be discussed, Choi said.
The Bank of Korea lowered its key interest rate cut to 1.75 percent as part of an unprecedented move to boost the economy.
The latest stats have been ominous signs for the economy, particularly the 11.1 percent youth unemployment rate and 0.5 percent inflation in February.
BY KIM HEE-JIN [firstname.lastname@example.org]