Finance Minister says greater fiscal role neededKorea’s chief economic policymaker said Monday that a greater fiscal role is necessary to tackle mounting economic uncertainties, create more jobs and address other chronic challenges.
“Recently, our economy is faced with many difficulties … and an active fiscal role is necessary,” Finance Minister Kim Dong-yeon said in a speech at a parliamentary budget committee, urging the National Assembly to approve the record high budget spending proposal.
“Exports and domestic demand remain relatively firm, but facility investment remains bleak, and the financial markets face increased volatility,” he said.
The minister also said external uncertainties stemming from the escalating trade war between the United States and China, the country’s two largest overseas markets, are increasing.
“In order to deal with growing uncertainties and invigorate the economy, a greater fiscal role is needed,” he said.
The government budget proposal for next year calls for a 9.7 percent on-year rise in spending to 470 trillion won ($422 billion), marking the fastest increase since 2009, when outlays jumped 10.6 percent in the aftermath of the 2008 global financial crisis.
The increase is based on forecasts that total state revenue will rise 7.9 percent next year to 481.3 trillion won, including 299.3 trillion won in taxes that will likely be collected.
Next year’s budget spending also heralds a greater fiscal role in Asia’s fourth-largest economy, where exports remain sound but private spending is showing signs of a slowdown.
The country has already been basking in a sharp hike in tax revenues thanks to a rise in income and corporate taxes amid a steady growth pace.
For 2019 as a whole, the finance ministry sees 299 trillion won in tax earnings, up 31.2 trillion won, or 11.6 percent, from this year’s estimate.’
The expansionary fiscal policy, among other things, is clearly aimed at boosting jobs. Under the proposal, some 23.5 trillion won will be spent on job creation schemes alone.
Poorer-than-expected jobs data is a hard blow to President Moon Jae-in, whose top economic agenda is to create more quality jobs.
Critics say a hike in the country’s legal minimum wage, which was raised by 16.4 percent this year to 7,530 won, is one of the key reasons for the pale figures.
Owners of small shops have claimed that the steepest increase in nearly two decades is driving them out of business, and some opponents say that it is one of the major reasons for the recent lackluster job creation.