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Extra budget expected to bolster S. Korea's potential GDP growth

All News 16:49 June 12, 2017

SEOUL, June 12 (Yonhap) -- International ratings agency Moody's said Monday a proposed extra budget by the South Korean government would bolster the nation's potential economic growth if it is effective.

President Moon Jae-in urged lawmakers earlier in the day to swiftly approve the 11.2 trillion won (US$9.91 billion) supplementary budget plan, which was unveiled last week and focused on job creation.

"The government expects the supplementary budget to add 0.2 percentage points to GDP growth this year and, if effective, the measures will support Korea's potential GDP growth, which would provide more significant support to Korea's credit quality," Moody's said in a statement.

The extra budget will not lead to a rise in the Korean government's debt because it is financed by higher-than-expected tax revenues and last year's budget surplus, Moody's said.

Moody's expected the Korean government's debt ratio to "stay stable at slightly below 40 percent of GDP over the next three years."

"Beyond that horizon, growth in the public-sector workforce, along with other campaign promises such as enhanced welfare programs, will lead to higher, hard-to-reverse current spending," Moody's said.

However, Moody's said the Korean government "will match higher spending with future measures to bolster government revenues. This will help to maintain the prudent fiscal stance of various Korean administrations."

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