Finance minister makes push for budget
“Time is of the essence for the supplementary budget, and when it is delayed any further, the effect will be reduced,” Finance Minister Yoo Il-ho said during a joint government press briefing held at the government complex in downtown Seoul. “We have designed the supplementary budget to be executed for four months starting September.”
The finance minister particularly raised concerns that the second half of the year could be a rocky one, with various downward risks including the end of an individual consumption tax cut that could curb consumer spending as well as restructuring of the shipping and shipbuilding industries.
“If the supplementary budget isn’t passed in time, 68,000 employment opportunities for workers who have lost their jobs [from restructuring] and for young people will vanish,” Yoo said. “The small and midsize shipbuilders are desperately waiting for work, and we should prevent these shipbuilders from closing down despite having competitiveness.”
The Ministry of Strategy and Finance released a report on Tuesday warning of potential contraction of the economy in the second half. The ministry noted that although the domestic economy is improving largely thanks to consumer spending, overall production has been sluggish due to various factors including the delay of export recovery.
Consumption is especially likely to shrink since the individual consumption tax cut, which helped boost spending in the first half, expired on June 30. The tax cut led retail sales in June to grow 1 percent compared to the previous month, faster than the 0.8 percent growth reported in May, largely thanks to strong automotive sales.
Retail sales grew nearly 9 percent year on year, higher than May’s 5.3 percent. Such a sales increase on top of active stock trading helped the service industry output grow 1 percent month on month and 5.4 percent year on year.
On the other hand, mining and manufacturing output shrank 0.2 percent compared to the previous month due to struggling exports, though year on year, it saw growth of 0.8 percent.
The start of the second half is already looking unfavorable, as exports in July nose-dived 10.2 percent, marking a 19th straight month of decline.
In his appeal to the legislature for the supplementary budget, the finance minister added that regional governments stand to benefit the most.
“Roughly 70 percent of the supplementary budget is designed to directly or indirectly support the provinces [outside of the greater Seoul area],” Yoo said. “If the local government support is delayed, the benefits, which are closely connected to the livelihood of the people in the provinces, will be reduced.”
The National Assembly is scheduled to vote on the supplementary budget on Friday.
BY LEE HO-JEONG [firstname.lastname@example.org]