Gov’t keeps focus on investment for 2020
Economic ministers including Finance Minister Hong Nam-ki, third from right, announce next year’s economic plans focused on investment at the government complex in central Seoul on Thursday. The government targets growth next year at 2.4 percent. This year’s growth is expected to reach 2 percent. [YONHAP]
The goal is to attract and spend 100 trillion won ($85.8 billion) of private and public investment, including in major infrastructure projects - an about-face from its previous position of not relying on major construction projects as a solution to economic weakness.
“Our first priority in breaking through [the stagnant economic situation] is investment,” Finance Minister Hong Nam-ki said Thursday. “The recovery of investment will determine the depth of next year’s economic rebound.”
The government has set its economic growth target at 2.4 percent for next year, 0.4 percentage points higher than this year’s officially estimated growth of 2 percent.
Additionally, it is hoping to add 250,000 new jobs.
When it came to power two and a half years ago, the Moon administration focused on its so-called income-led growth, believing that creating jobs and boosting salaries through such measures as raising the minimum wage would propel overall economic growth.
However, its position changed as the economy lost steam, and this year’s growth is expected to be the lowest in a decade.
So a year ago, the administration’s focus switched from the distribution of wealth to growth. That focus remains for next year.
This year’s officially projected economic growth at 2 percent will be the slowest since 2009, when Korea’s economy inched up 0.8 percent compared to the previous year in the wake of the global economic meltdown.
After posting 3.2 percent growth in 2017, the economy has lost steam despite record-breaking budgets.
With a general election less than half a year away, the economy is expected to be a significant factor.
Investment throughout this year has continued to shrink, although in the second half, the decline eased somewhat.
In the first quarter, facilities investment nosedived 17.4 percent year-on-year, which eased to a 7.8 percent decline in the second quarter. In the third quarter, it was down 3.2 percent.
For next year, the government has set a so-called “one-plus-four” economic policy agenda. The “one” stands for a main priority, while the “four” stands for subsidiary focuses.
The main priority is policies to overcome the weak state of the economy including encouraging large investments, promoting consumption through major discount events and promotions, infrastructure projects, export support and supporting innovation in local economies.
The government is hoping for 25 trillion won in investment from major private companies, 15 trillion won from the private sector investing in major government projects and 60 trillion won in investment from public institutions.
The government also plans to spend 23.2 trillion won on infrastructure, which is 3.5 trillion won more or a 17 percent increase over this year. The infrastructure projects include 6 trillion won to expand transport networks connecting major cities surrounding Seoul including updating outdated infrastructure and new housing supplies, along with 300,000 units in the greater Seoul area.
To encourage companies to invest in their facilities and equipment, the government will introduce a 4.5 trillion won loan program offering a minimum interest rate of 1 percent as well as various tax benefits on investments.
The government also plans policies to encourage Korean companies to repatriate factories and research and development labs abroad. It’s also promising tax support for small- and medium-sized enterprises that contribute to jobs, investment and environmental protection.
To spur consumption, there will be a refund on value-added tax on items purchased on Korea’s own Black Friday, which is held in November, and a 70 percent cut in individual consumption tax for people who purchase new non-diesel cars in exchange for cars that are 10 years old or older through the end of June.
The four subsidiary economic goals for next year are: strengthen innovative growth engines; change the current economic structure through bold restructuring in labor, fiscal management, public institutions and digital government; expand the foundation for an inclusive economy; and pre-emptively work on future obstacles to growth, from demographic changes to climate change and economic cooperation with North Korea.
The government plans to spend some 62 percent of next year’s budget in the first six months. This year, it spent 61 percent in the first six months.
On jobs, the government for the first time said it was coming up with a plan to help people in their 40s in the first quarter of next year.
During a senior secretary meeting at the Blue House Monday, Moon ordered the government to come up with special measures for people in their 40s.
“It hurts to see that people in their 40s, who are the central force of our economy, continue to struggle in jobs while the improvement in job figures is becoming clear,” Moon said at the meeting. “While the government has been focusing on job policies for young people in their 20s, 30s, 50s and even elderly people of 60 years or older, we have to look back to see if we made any efforts for people in their 40s.”
In the last four months, more than 300,000 jobs were created, but many went to people in their 60s or older. People in their 40s have been losing jobs for 26 consecutive months, which is the longest streak recorded since related data started being compiled in 1982.
Next year the government expects 250,000 new jobs to be created, which is a slight drop from this year’s 280,000. The decline was largely due to a shrinking productive population. The government estimated the productive population aged between 15 and 65 would decline 231,000 next year, far sharper than the 56,000 in 2019.
However, it added that the active participation of young people, women and elderly people will likely cushion the decline.
The government is expected to face criticism as it plans to again raise the number of jobs for elderly people. The government has decided to increase the number of government-funded jobs from 800,000 this year to 945,000 next year. Of that total, 78 percent or 740,000 will be for people who are in their 60s or older.
The government has been accused of spending too much money to create jobs for old people.
Moon on Thursday said this does not mean that the government is giving up on the idea of a more inclusive economy or creating jobs through innovation.
“In the past we saw inclusiveness and innovation contradicting each other,” Moon said. “However, inclusive is the foundation of innovation.”
He said changes in industry especially with the rapid implementation of technology, will threatened existing systems. But without safety nets, innovations are impossible.
“This means for innovation, inclusiveness is necessary,” Moon said.
BY LEE HO-JEONG [lee.hojeong@joongng.co.kr]
with the Korea JoongAng Daily
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