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(News Focus) Finance minister nominee set to expand fiscal intervention to boost economy

All Headlines 18:26 May 22, 2017

By Kim Boram

SEJONG, May 22 (Yonhap) -- As the Moon Jae-in administration appointed a veteran fiscal policy expert as its first economic chief, Asia's fourth-largest economy is expected to rely more on budgetary tools to boost growth and improve employment.

Kim Dong-yeon who started his government career at the finance ministry in 1982 said expansionary fiscal policy is necessary to tackle the pressing tasks such as chronically low economic growth and high youth unemployment rate.

"Under the current circumstances, expansionary fiscal policy seems to be appropriate," he told reporters on Sunday. "Weak economic growth and high unemployment will undermine the quality of labor force and finally, hurt the country's growth potential."

South Korea's finance minister nominee Kim Dong-yeon speaks at a press meeting in Gwacheon, south of Seoul, on May 21, 2017. (Yonhap)

The South Korean economy saw its growth remain below the 3 percent level in recent years amid a global economic slump, raising concerns that the country has already entered a low growth cycle. For 2017 and 2018, its growth is also expected to hover in the 2.6-2.8 percent range.

Coupled with the sluggish economy and a change in industrial structure, the jobless rate of young people has been on the rise. Unemployment for those aged between 15 and 29 hit a record of 9.8 percent in 2016, with the entire rate remaining at 3.7 percent.

President Moon has pledged to put his policy priority on creating more jobs for youngsters as a means to revive economic dynamics, which has been losing ground mainly due to rapid aging and low birth rate.

As a first step, the chief executive said he will draw up a supplementary budget worth 10 trillion won (US$8.95 billion) in the second half to tackle the most pressing issues. For fiscal 2017, a total of 400.5 trillion won has been earmarked for the budget.

The finance minister-nominee, who had handled budgetary issues for about 30 years, agreed with the president's plan.

"We need the extra budget (at this juncture)," he said. "But the most important thing is where this money will be spent. I asked ministry officials to make sure that the supplementary budget produces positive outcomes."

He said he will come up with other strong fiscal policies to help allocate funds that can boost vitality and improve growth potential in a more effective way.

But the incoming economic policymaker took a cautious stance on a tax hike to finance the new president's election pledges to create jobs and revive the economy.

Many estimated that some 178 trillion won will be necessary to carry out Moon's campaign pledges, including the creation of 810,000 public jobs, in the coming five years.

The government is preparing to revise tax codes in July to back the president's plans.

"I'll seek ways to increase effective tax rates first, such as removing tax exemptions," said Kim. "A careful approach is needed in terms of increasing corporate taxes."

The South Korean government has basked in healthy tax incomes since last year when the total tax revenue reached 242.6 trillion won, exceeding the original target by 9.8 trillion won and shooting up a record 24.7 trillion won from a year earlier.

Meanwhile, in a lecture held in Ajou University south of Seoul, he called for wider opportunity for upward social mobility in a way to help the economy grow continuously.

"We have to take into account the structural problem of the society," said Kim, who currently serves as the president of university said. "We have to make efforts to increase social mobility to develop the economy further and help people be ambitious."


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