Saenuri accepts Park’s $13B stimulus budget

The Park Geun-hye administration and the ruling party agreed Wednesday to create a big supplementary budget and approve it before the end of this month to boost sluggish domestic consumption and keep economic growth above 3 percent.

The Saenuri Party and the government agreed to create a supplementary budget of 15 trillion won ($13.42 billion) and discussed a legislative timetable to approve it.

The consultation, which took place at the National Assembly in the morning, was led by Rep. Won Yoo-chul, chief policymaker of the Saenuri Party, and Choi Kyung-hwan, deputy prime minister for the economy and finance minister, as well as their deputies.

The Saenuri Party caved into the government’s desire for a big supplementary budget. Saenuri floor leader Yoo Seong-min had earlier insisted that the party would only support a supplementary budget of 10 trillion won. But that was before President Park started demanding the sacking of Yoo over a bill she vetoed last week.

Yoo was conspicuously absent from the consultations with the government.

The extra government spending is intended to overcome the economic slump caused by the outbreak of Middle East respiratory syndrome (MERS) and a recent drought.

At the end of last year, the Ministry of Strategy and Finance projected this year’s growth to be 3.8 percent, but now there are worries that the economy is facing its biggest challenge since the 2008 global financial crisis and it will have trouble keeping growth above 3 percent.

“Our economy was showing a glimmer of recovery based on domestic consumption and the real estate market, but it was hit seriously by the MERS outbreak,” Choi said. “The farmers’ concerns are also deepened due to the extreme drought.”

Choi said implementing bold measures preemptively is important to restore momentum to the economy.

Stressing that speed is key, Choi said the cabinet will review the proposal this week and submit it to the National Assembly Monday. He urged the legislature to review and approve the bill as soon as possible.

“In order to maximize the effect, we agreed to create the largest possible supplementary budget without endangering the fiscal health of the country,” said Rep. Kim Sung-tae, the Saenuri Party’s chief negotiator on the National Assembly’s Special Committee on Budget and Accounts, after the meeting.

Kim added that the goal will be passing the supplementary budget bill on July 20. “Then, the money will all be spent before the end of this year, with an aim to speedily inject the funds into the most needed places,” he added.

He said he would have a meeting with his counterpart in the main opposition party, the New Politics Alliance for Democracy (NPAD), later in the afternoon to discuss the legislative schedule. “The ruling and opposition parties share the understanding that the issue must not be used politically for the sake of the people.”

“We have no disagreement with the government’s plan to create a supplementary budget, but the issue will be how to distribute the money,” said Rep. Kim Jae-kyung of the Saenuri Party, the chairman of the National Assembly’s Special Committee on Budget and Accounts. “Since it is an urgent matter, the committee will start working soon.”

Shortly after its launch in 2013, the Park administration spent a 17.3 trillion won supplementary budget to boost the economy. If the latest proposal is approved, it will be the second such program for this government. And the Park government will become the first administration that spends two supplementary budgets with each over 10 trillion won.

Since the 1997 foreign exchange crisis, supplementary budgets have been used in Korea as stimulus. Supplementary budgets were passed every year except for 2007, 2010, 2011, 2012 and 2014, but only three of them were over 10 trillion won.

The 1998 supplementary budget came in the wake of the Asian Financial Crisis and the 2009 budget followed the global financial crisis.

Park appeared to be taking a break in her war with the National Assembly to pay more attention to the economy. Leaving her loyalists in the Saenuri Party to deal with the fate of the floor leader, Park has refrained from commenting politics for the past few days.

On Wednesday, she hosted a meeting to check on the progress of key government projects.

The Blue House also stressed the importance of the supplementary budget.

“While exports were sluggish, domestic consumption also shrank due to the MERS outbreak,” Senior Presidential Secretary for Economic Affairs Ahn Jong-beam said, adding the situation was worse than after the sinking of the Sewol ferry in April 2014.

BY SER MYO-JA [ser.myoja@joongang.co.kr]