(LEAD) S. Korea seeks 2.5 pct increase in budget spending for 2010

(ATTN: TRIMS lead; REPLACES or ADDS quotes in 4th and last paras with finance
minister's comments; ADDS detailed figures in 8th para)
By Koh Byung-joon
SEOUL, Sept. 28 (Yonhap) -- South Korea's government said Monday that it seeks to
raise its budget spending for 2010 by 2.5 percent with a marked increase in
expenditure on bolstering economic growth and stabilizing the livelihoods of
ordinary people.

According to a budget plan prepared by the Ministry of Strategy and Finance, the
nation' budget spending, which includes that of various state-controlled funds,
will amount to 291.8 trillion won (US$246 billion) next year, compared with 284.5
trillion won set aside for 2009.
The planned expenditure, however, is smaller than this year's total spending of
301.8 trillion won that includes an extra budget crafted in April to help the
nation get over the worst downturn in more than a decade, it added.
"Next year's budget is mainly focused on providing a firm flatform for an
economic recovery while at the same time paying no less attention to offering
support for those in the post-crisis era," Finance Minister Yoon Jeung-hyun told
reporters after attending a Cabinet meeting where the budget plan was endorsed
before being presented to parliament in October for approval. "We will also make
efforts to achieve fiscal soundness earlier than expected," he added.
In the wake of the collapse of Lehman Brothers a year ago, South Korea has rushed
to ease the shocks from financial market turbulence and resulting global
recession by expanding fiscal spending, cutting taxes and pushing for other
stimulus measures. The central bank also joined the move by slashing its key
interest rate sharply to a record low level.
Apparently driven by such efforts, the economy is making a faster-than-expected
recovery and the government claimed it will stick to its "expansionary"
macroeconomic policy stance until the economy is on a firmer path to recovery.
Some experts, however, raise concerns that such stimulus measures could undercut
the government's efforts to attain fiscal soundness in the mid- and long-term
period as expanded fiscal spending and declining tax revenue amid an economic
slowdown would dent its bottom line.
According to the ministry, state revenue from tax and fund operations is expected
to decline 1.1 percent to 287.8 trillion won, while national debt will amount to
407.1 trillion won, which will account for 36.9 percent of the nation's gross
domestic product, up from this year's estimated 35.6 percent.
In order to help enhance the fiscal status, the ministry said that it will work
"actively" to streamline and enhance the effectiveness of the nation's overall
spending process and reduce tax benefits deemed to be "unreasonable." The
ministry also aims to lower the debt-to-GDP ratio in the mid-30 percent range by
2013.
"It would be tough to achieve our earlier target of attaining a balanced budget
by 2012 but the government will run its fiscal polices to achieve the objective
faster than the other group of 20 advanced and emerging countries," the finance
ministry said in a statement, adding that it will strive for a balanced budget by
2013-2014.
"We will run our fiscal policy in response to an economic recovery in the short
term while placing top priority on enhancing economic growth potential in the
mid- and long-term period," it noted.
The ministry seeks to increase state spending on research and development by 10.5
percent to 13.6 trillion won next year as part of efforts to strengthen the
nation's longer-term growth capability. Spending on foreign and North
Korea-related affairs will increase 14.7 percent to 3.4 trillion won.
To help low-income and other underprivileged people, the ministry said that it
will push to increase spending on health and welfare by 8.6 percent to 81
trillion won, which accounts for around 28 percent of the total budget.
Spending on education, however, is expected to decline 1.2 percent to 37.8
trillion won, while expenditure on smaller companies, industry and the energy
sector will shrink 10.9 percent to 14.4 trillion won, according to the ministry.
The ministry said that the 2010 spending and revenue forecast are based on the
premise that the South Korean economy will shrink 2 percent this year before
expanding around 4 percent next year on the government-led stimulus measures and
improving external market conditions.
Finance Minister Yoon said during the press conference that he is "confident"
that the nation could achieve the 4-percent growth objective for next year,
dismissing claims that the government is too optimistic given the global economic
conditions.
kokobj@yna.co.kr