2019 gov’t spending may be 7.5% higherThe Korean government’s spending for next year will increase by more than seven percent, according to the country’s top economic policymaker.
Kim Dong-yeon, Korea’s finance minister and deputy prime minister for the economy, said during a meeting with reporters on Thursday at the Sejong government complex that government expenditure for next year could increase by 7.5 percent or more to “vitalize the economy” and “strengthen the social safety net.”
The government’s plan to raise its expenditure will be reflected in next year’s budget, which the Finance Ministry is currently working on.
The government’s budget for this year was 428.8 trillion won ($383 billion).
If the government increases this by eight percent, the total government budget will be around 463 trillion won next year.
Initially, the Finance Ministry considered pushing up next year’s budget by about 5.7 percent but decided to revise its target to seven percent in May. The ruling Democratic Party asked the Finance Ministry to raise it by as much as 10 percent.
“We need to strengthen our fiscal policy to address issues such as [poor] employment conditions and worsening income distribution,” said Kim.
But when asked whether the government is considering a second round of supplementary budgets for this year, Kim answered, “while it makes sense given the economic situation and the tax revenue [the government holds], it’s not an easy decision to make.”
Kim and the Finance Ministry submitted an extra budget bill worth about 3.9 trillion won in April and the National Assembly reduced it to 3.83 trillion won and passed it in May.
“I think it’s somewhat necessary because of the economic situation, like the condition of the job market, but realistically speaking it will be difficult,” Kim added.
Kim also said the government’s budget for research and development will exceed 20 trillion won for the first time next year. This year’s budget for research and development stands at around 19 trillion won.
Kim emphasized the importance of developing the so-called platform economy in Korea, which refers to economic activities on digital platforms. Kim mentioned companies such as Microsoft, Google and Amazon and said the Korean government will make aggressive investments to help local companies gain a competitive edge.
The minister also talked about deregulation to follow the current global economic trends, including the sharing economy, although he took a cautious approach as to how the government will deregulate to promote the sharing economy model in Korea.
“It shouldn’t be understood as the government allowing everything about the sharing economy,” Kim said. “For example, we allow the operation of Airbnb in cities just for foreigners, and if we loosen such regulations, there will always be some backlash.”
“We need to come up with measures that could compensate existing players for possible losses when new players emerge,” Kim added.
A large part of the government’s budget for next year will also focus on the development of public infrastructure and services, especially concentrating on projects that could increase public welfare, such as urban restoration.
This year’s budget for social overhead capital was 19 trillion won.
Along with an outlook for next year’s budget, the finance minister also addressed the government’s stance about working with conglomerates, which has been a hot potato recently after a rumor spread that the Blue House told Kim not to “beg” prior to his visit to Samsung Electronics.
Kim, who has sat down with top executives from five conglomerates in Korea, the latest being Samsung Vice Chairman Lee Jae-yong earlier this week, said that, although he does not know which company he will visit next, he will continue to meet executives of conglomerates to show that they are partners with the administration and a vital part of its economic policy.
When asked about the recent heat wave and its effect on the country’s economy, Kim said, although the Finance Ministry expects the impact on the economy will be limited, the government is concerned about low-income earners and vulnerable people who are exposed to the heat more than others.
“Regarding inflation, we are taking initiatives, such as releasing emergency supplies of goods,” Kim said.
BY CHOI HYUNG-JO [firstname.lastname@example.org]