Moon orders aggressive spendingPresident Moon Jae-in ordered the government on Thursday to spend more aggressively to solve problems such as slowing growth, weak jobs and worsening demographic changes.
“There are many areas in which we are still inadequate where people could feel improvements in the overall quality of their lives,” Moon said during a government national fiscal strategy meeting in Sejong. “There’s a need for the [government] finances to take a bolder role, more than ever, in urgently solving our society’s structural problems from low growth, polarization [of the top and bottom tiers], jobs, low fertility rate and aging population.”
Although this is the third meeting held under the current administration, it was the first time that the meeting was held in Sejong instead of at the Blue House.
“We’re at a turning point where we have to look back on our achievements in the last two years and prepare for the remaining three years,” Moon said.
Moon particularly stressed that low-income people outside of the employment market, such as those who run small businesses like restaurants and convenience stores, need help.
“Self-employed people and those in lower-income households are struggling the most and this hurts me,” Moon said. “There is a demand for a more aggressive fiscal role in expanding jobs, enhancement on job safety nets such as introducing a system where additional financial support is provided for those whose unemployment paychecks has ended and measures for self-employed businesses.”
On the possibility of Korea’s national fiscal soundness being affected by the greater spending, the president said Korea’s national fiscal situation is extremely strong.
“We need to look at it in the long-term,” Moon said. “The budget for creating an innovative and inclusive country shouldn’t be seen as wasteful spending but rather as a pre-investment in improving our economic and social structure.”
He again requested that the opposition party cooperate in passing the supplementary budget, citing the worsening situation in the first quarter.
“As they say economics is about sentiment, the [government’s] finances should take an aggressive role in boosting economic vitality so that the sentiment doesn’t sour among those participating in the economy,” Moon said. “I request that the National Assembly quickly be normalized so that the government’s supplementary budget can be discussed.”
He then stressed that timing is important, adding that further delays would only reduce its effects.
Despite having to pass an all-time record budget of 469.6 trillion won ($395.2 billion), the government last month requested an additional 6.7 trillion won supplementary budget at the National Assembly. The Moon government has requested a supplementary budget every year since it has taken office. The government expects the supplementary budget to bump up economic growth by 0.1 percentage points.
However, the discussion of the supplementary budget has been stalled due to political conflict on electoral and investigative reform, and the largest opposition party, Liberty Korea Party (LKP), has been reluctant to accept the supplementary budget. The LKP claims the budget, rather than focusing on stimulus, was created to win over voters ahead of next year’s general election and has accused Moon of trying to cover the mistakes of its income-led growth policy with the public’s tax money.
Out of the total supplementary budget, 67 percent, or 4.5 trillion won, is designated for improving the economy. While the majority of that, or 2.9 trillion won, will be used for trade finances for small and medium-sized companies expanding their export markets, it also includes 1.8 trillion won that will be spent on jobs, such as creating 73,000 government jobs and increasing the number of people who will be receiving unemployment paychecks and vocational vouchers.
There are also growing concerns about an additional increase in government spending, especially as the Korean economy could be facing more headwinds compared to last month. The Bank of Korea lowered its growth projection for this year from 2.6 percent to 2.5 percent last month, adding to the case for an additional stimulus budget. The rising trade tensions between the United States and China have seen both countries slapping tariffs on each other’s goods, increasing instability in the global market. This could further affect Korea’s exports, which have been shrinking.
The won depreciation is gaining momentum and is now edging closer to 1,200 won against the U.S. dollar. The last time the won was above 1,200 won against the greenback was in January 2016.
BY LEE HO-JEONG [email@example.com]