Finance minister says no immediate plan for extra budgetMadeinkoreablog
Korea’s finance minister said Wednesday that he has no immediate plan to draw up a supplementary budget to stimulate the economy, but hinted at cutting the country’s 2016 growth target from 3.1 percent.
“I’m not considering an extra budget as of now,” Finance Minister Yoo Il-ho said in a press conference to mark his 100th day in office. “I will use any fiscal measures to prop up the economy when we have a sudden spell of challenges at home and abroad. But I don’t think the country is not in such a state at the moment.”
The Seoul government poured more than 40 percent of its budget for 2016 in the first three months of the year to pump-prime Asia’s fourth-largest economy grappling with faltering exports and flaccid domestic consumption.
But many called for further fiscal spending during the latter half of the year to achieve the goal of 3.1 percent as major economic indices remained sluggish over the first quarter with tepid signs of improvement.
Outbound shipments continued their downbeat pace in every single month of 2016, plunging nearly 20 percent in January, the largest monthly drop in more than six years, 12 percent in February and 8.1 percent in March.
It is expected to continue its negative trajectory for 16 months in a row in April.
In addition, retail sales fell 1.8 percent on-month in February despite the resumption of an excise tax cut program and facility investments retreated 6.8 percent in February.
Economists noted that even if Yoo decides to allocate a supplementary budget, it is not easy for the government to use that card again in 2016 as the national debt accounted for nearly 40 percent of the GDP last year and the opposition-led National Assembly voices against it.
Against this backdrop, Yoo hinted at a possible downgrade of the government’s growth forecast of 3.1 percent, citing the recent International Monetary Fund (IMF)’s downward revision.
The IMF slashed South Korea’s forecast to 2.7 percent last week and the Bank of Korea also revised down its 3 percent growth target to 2.8 percent.
“We’ve carried out short-term expansionary policies to boost the economy, but the Korean economy is still daunted by weak private consumption and sluggish facility investment,” said the top economic policymaker. “Given this gloomy data, the IMF made such decision. I also think such downside risks are becoming a reality.”
At the same time, the finance minister said he will push forward with structural reforms, including corporate restructuring and labor reform, to help the country further improve its growth potential and create more jobs.
“Apart from the short-term measures, I have had to put policy priority on carrying out sweeping reforms in the business and labor sectors to make the economy healthier in the longer-term,” said Yoo. “I will speed up to complete the restructuring and reform in due process and seek parliamentary support.”
Five industries — shipbuilding, shipping, construction, steelmaking and petrochemicals — were subject to the government-led restructuring drive because such large-sized, labor-intensive businesses hit hard by a global slowdown have become a drag on the economy.
In particular, local shipyards and shippers are at the top of the list as they have suffered snowballed losses due to a delay in the construction of offshore facilities and order cancellations. The global shipbuilding and shipping industries currently remain in the doldrums.
The finance minister said he will make constant efforts to convince the parliament to pass controversial reform-related bills that have been deadlocked due to political standoff and the general elections last week, where the ruling party lost its majority.
“If we miss the timing for structural reform, we may lag far behind the global trend,” said the economic official. “I will do my best to help the people feel the positive effects of economic stimulus structural reform.”