World Economy

South Korea Minister Vows Stronger Fiscal Intervention

South Korea Minister Vows Stronger Fiscal InterventionSouth Korea Minister Vows Stronger Fiscal Intervention

South Korea’s chief economic policymaker on Wednesday reaffirmed his pledge for stronger fiscal intervention to prop up Asia’s fourth-largest economy facing downside pressures at home and abroad.

“Considering difficult economic conditions, I will strengthen the government’s role in creating jobs and stabilizing the people’s livelihood,” Finance Minister Yoo Il-ho said in a ministerial-level meeting in Seoul. “The government will make full efforts to meet the target of the scheduled government spending for next year. We will be well prepared to implement public projects to improve livelihoods as soon as possible,” Yonhap reported.

The South Korean government earlier said it would spend nearly 70% of its 400 trillion won budget ($342.5 billion) earmarked for 2017 in the first half to pre-emptively cope with economic uncertainties stemming from the political turmoil in South Korea and a government change in the United States.

The finance minister called on the government ministries to stand ready to front-load budget spending as much as possible.

Asia’s fourth-largest economy is experiencing a tepid recovery due to faltering exports and lukewarm domestic demand coupled with the recent political turbulence sparked by the impeachment of President Park Geun-hye.

Its exports, the key economic driver, have posted minus growth 21 times in the past 23 months since January 2015, while fiscal intervention, which has contributed to boosting private consumption and the real estate market throughout 2016, is expected to lose ground in the coming months due to the leadership vacuum in the government.

Following the National Assembly’s vote to impeach Park last week, the cabinet is being led by Prime Minister Hwang Kyo-ahn until the Constitutional Court determines Park’s fate, a process that could take up to 180 days.

Against this backdrop, a number of local and foreign think tanks and investment banks cut their 2017 forecast for the South Korean economy. The Organization for Economic Cooperation and Development downgraded its earlier outlook to 2.6% from 3%, while the state-run Korea Development Institute predicted that South Korea will expand 2.4% next year, down from an earlier 2.7%.

The top economic policymaker said his team is doing its best to prevent such political uncertainties from spreading into the economy. “The government has come into an emergency mode to minimize a leadership vacuum and stabilize the people’s livelihood,” said Yoo, who also doubles as deputy prime minister for economy. “We will remain on high alert to check the impact of internal and external events such as the result of the US Federal Reserve meeting later this week.”

Add new comment

Read our comment policy before posting your viewpoints