ID :
82120
Mon, 09/28/2009 - 14:38
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https://www.oananews.org//node/82120
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News Focus) S. Korea prioritizes economic recovery in 2010 budget proposal
By Koh Byung-joon
SEOUL, Sept. 28 (Yonhap) -- The 2010 budget plan proposed by South Korea's
government on Monday highlights its continued drive to reinvigorate the sluggish
local economy, reconfirming its stance that it will maintain "expansionary"
fiscal and monetary measures until the economy is on a firmer path to recovery.
Many experts view the expanded budget as the appropriate policy response as the
crisis has yet to end, but others have cautiously suggested that the government
needs to take a more conservative line on its fiscal policies amid a ballooning
government deficit.
Earlier in the day, the government endorsed a 2.5 percent increase in budget
spending for next year, saying that a marked share of the increased expenditure
will be used in bolstering the economy and strengthening the nation's health and
welfare system.
Under the budget plan to be presented to parliament for approval in October, the
government seeks to spend 291.8 trillion won (US$246 billion) next year, compared
with 284.5 trillion won set aside for 2009.
"We will maintain active fiscal measures to reinvigorate the local economy next
year," Finance Minister Yoon Jeung-hyun told reporters in a press briefing on the
budget plan.
The budget increase comes as the economy, Asia's fourth-largest seems to be
staging a faster-than-expected rebound from a steep downturn caused by the
financial turbulence and resulting global recession last year.
Optimism is growing the economy could soon pull out of the dark tunnel thanks to
the government-led stimulus measures and aggressive reduction in borrowing costs
by the central bank. The improved mood caused some policymakers and experts to
bring up the issue of when and how to withdraw those actions in a so-called exit
strategy.
"The crisis is not over yet," Yoon told reporters, mentioning the same consensus
reached in the recently-ended meeting of group of 20 advanced and emerging
countries in Pittsburgh. "The government prioritizes its efforts on laying the
firmer ground for an economic recovery and keep supporting projects for the
post-crisis era. No less attention, however, will be paid to attaining a balanced
budget earlier than our target."
The ministry said that it seeks to increase R&D spending by 10.5 percent to 13.6
trillion won next year, while spending on health and welfare will increase
sharply, with a total of 81 trillion won set aside in the area, up 8.6 percent
from this year.
Meanwhile, expenditure on foreign and North Korea-related affairs would jump 14.7
percent, while national defense spending would rise 3.8 percent next year.
Environment, cultural, tourism and sports areas would also see larger budget
spending next year but education spending is expected to shrink slightly.
The budget proposal is based on the expectations that South Korea's economy will
expand 4 percent next year after contracting 1.5 percent this year.
"It is fair to say that the government has kept its expansionary macroeconomic
policy stance and the 2010 budget proposal seems to place more weight behind an
economic recovery," said Lee Boo-hyung, a senior economist at Hyundai Research
Institute.
"It seems that the government has taken the right approach, but it should keep
its eye on how effectively the spending will be made and the budget should be
adjusted if there is need," he added.
However, some still express concerns that the government should be more careful
not to aggravate the nation's worsening fiscal deficit amid declining state
revenue.
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.
"Next year's budget plan should be crafted by taking into account the timing of
an exit strategy aimed at taking back stimulus measures," Cho Kyung-up, a senior
economist at Korea Economic Research Institute.
"The exit strategy on the fiscal front is how to reduce fiscal shortfalls but at
this moment it is difficult to increase tax revenue. This means that the
government should trim spending and reform its overall spending procedure," he
added.
kokobj@yna.co.kr
(END)
SEOUL, Sept. 28 (Yonhap) -- The 2010 budget plan proposed by South Korea's
government on Monday highlights its continued drive to reinvigorate the sluggish
local economy, reconfirming its stance that it will maintain "expansionary"
fiscal and monetary measures until the economy is on a firmer path to recovery.
Many experts view the expanded budget as the appropriate policy response as the
crisis has yet to end, but others have cautiously suggested that the government
needs to take a more conservative line on its fiscal policies amid a ballooning
government deficit.
Earlier in the day, the government endorsed a 2.5 percent increase in budget
spending for next year, saying that a marked share of the increased expenditure
will be used in bolstering the economy and strengthening the nation's health and
welfare system.
Under the budget plan to be presented to parliament for approval in October, the
government seeks to spend 291.8 trillion won (US$246 billion) next year, compared
with 284.5 trillion won set aside for 2009.
"We will maintain active fiscal measures to reinvigorate the local economy next
year," Finance Minister Yoon Jeung-hyun told reporters in a press briefing on the
budget plan.
The budget increase comes as the economy, Asia's fourth-largest seems to be
staging a faster-than-expected rebound from a steep downturn caused by the
financial turbulence and resulting global recession last year.
Optimism is growing the economy could soon pull out of the dark tunnel thanks to
the government-led stimulus measures and aggressive reduction in borrowing costs
by the central bank. The improved mood caused some policymakers and experts to
bring up the issue of when and how to withdraw those actions in a so-called exit
strategy.
"The crisis is not over yet," Yoon told reporters, mentioning the same consensus
reached in the recently-ended meeting of group of 20 advanced and emerging
countries in Pittsburgh. "The government prioritizes its efforts on laying the
firmer ground for an economic recovery and keep supporting projects for the
post-crisis era. No less attention, however, will be paid to attaining a balanced
budget earlier than our target."
The ministry said that it seeks to increase R&D spending by 10.5 percent to 13.6
trillion won next year, while spending on health and welfare will increase
sharply, with a total of 81 trillion won set aside in the area, up 8.6 percent
from this year.
Meanwhile, expenditure on foreign and North Korea-related affairs would jump 14.7
percent, while national defense spending would rise 3.8 percent next year.
Environment, cultural, tourism and sports areas would also see larger budget
spending next year but education spending is expected to shrink slightly.
The budget proposal is based on the expectations that South Korea's economy will
expand 4 percent next year after contracting 1.5 percent this year.
"It is fair to say that the government has kept its expansionary macroeconomic
policy stance and the 2010 budget proposal seems to place more weight behind an
economic recovery," said Lee Boo-hyung, a senior economist at Hyundai Research
Institute.
"It seems that the government has taken the right approach, but it should keep
its eye on how effectively the spending will be made and the budget should be
adjusted if there is need," he added.
However, some still express concerns that the government should be more careful
not to aggravate the nation's worsening fiscal deficit amid declining state
revenue.
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.
"Next year's budget plan should be crafted by taking into account the timing of
an exit strategy aimed at taking back stimulus measures," Cho Kyung-up, a senior
economist at Korea Economic Research Institute.
"The exit strategy on the fiscal front is how to reduce fiscal shortfalls but at
this moment it is difficult to increase tax revenue. This means that the
government should trim spending and reform its overall spending procedure," he
added.
kokobj@yna.co.kr
(END)
