After BOK action, attention shifts to supplementary budget

After the Bank of Korea’s rate cut to another record low of 1.5 percent, the market is closely watching whether Finance Minister Choi Kyung-hwan will bring in a supplementary budget to augment monetary policy and boost the sagging economy.

At a cabinet meeting Wednesday, Choi said he would strive for “additional measures to supplement the economy” after reviewing the overall impact of Middle East respiratory syndrome (MERS) could have on the domestic economy. His comment came as the latest figures show rapidly shrinking domestic consumption.

According to the Ministry of Strategy and Finance, the number of people at department stores, movie theaters and baseball games during the first week of June, when the first deaths were confirmed, were 30 to 80 percent below the same period a year ago.

“Nothing has been decided yet, as we are just closely watching the MERS situation,” said a high-ranking Finance Ministry official. “In general, it takes at least three months to implement a supplementary budget, but it could be done faster than that depending on how quickly it is approved by the National Assembly.”

At the assembly, ruling and opposition lawmakers sparred over the need for a supplementary budget.

“There has been no report from the Finance Ministry on a supplementary budget, but if we receive a proposal, we will immediately review it,” said Rep. Yoo Seong-min of the Saenuri Party at meeting Thursday.

Still, Rep. Lee Jong-kul, floor leader of the New Politics Alliance for Democracy, expressed concerns, saying, “Although we understand the inevitability [of a supplementary budget] but we are concerned about a reckless policy that could have an unexpected impact on the economy.”

BOK Gov. Lee Ju-yeol refused to comment on the possibility of a supplementary budget on Thursday, saying, “A supplementary budget is a matter to be decided by the government.”

In April, Lee told a reporter, “Although the requirements for a supplementary budget are strict and we should consider the soundness of the state’s budget, [public] finance should do something.”

Still, the current budget deficit would be a hurdle for supporters of a supplementary budget. In the first quarter, the government reported a 26 trillion won ($23.4 billion) deficit, up 1 trillion won year-on-year. In 2014, Korea recorded its worst-ever fiscal deficit.

BY KIM HEE-JIN [kim.heejin@joongang.co.kr]