[THE INVESTOR] With the government seen leaning toward compiling a supplementary budget, attention is now being drawn to the size of the possible fiscal boost.
Experts said the government has room for a “sizable” extra budget of more than 10 trillion won, given that this year’s tax collection was running 23 percent higher than the year before.
“The government will actively reinforce fiscal measures in the second half of the year,” Finance Minister Yoo Il-ho said Friday, predicting a tougher time ahead for Asia’s fourth-largest economy.
“We will finalize soon a policy mix, with an extra budget being an option,” he said, in what was seen as his biggest hint at a fiscal spending plan to support the economy.
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While lackluster growth is no news for Korea’s top economic policymakers, weak jobs data appears to have weighed heavy on their minds, prompting their change of stance on the extra budget issue, observers said.
In 2014 and 2015, when Korea’s economy grew less than 3 percent, the monthly job creation hovered around 150,000. In April, that shrank to around 50,000, they pointed out.
On top of that, the government is urged to take measures to offset the effect of the looming wave of corporate restructuring on the job market.
“The downside risk to employment looks almost certain to grow in the second half, even at this point when corporate restructuring hasn’t really started in earnest,” said Lee Ho-seung, a director at the Finance Ministry.
The ministry, which last year set its economic growth estimate for 2016 at 3.1 percent, is to reveal a revised economic outlook later this month. Predictions from private economists are significantly lower at around mid-2 percent.
Hyundai Research Institute, in a report earlier this month, estimated that the government would need to spend 22 trillion won additionally to help the economy approach its growth target.
The last time Korea drew up such a big supplementary budget was in 2009, amid the global financial crisis. It provided 28.4 trillion won to the economy in that year’s supplementary budget.
By Lee Sun-young (
milaya@heraldcorp.com)