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(2nd LD) S. Korea draws up 6.7 tln-won extra budget to tackle economic slowdown, fine dust

National 14:29 April 24, 2019

(ATTN: ADDS more comments by finance minister in para 22)
By Kim Kwang-tae

SEJONG, April 24 (Yonhap) -- South Korea proposed a 6.7 trillion-won (US$5.8 billion) extra budget Wednesday to cope with a slowdown in Asia's fourth-largest economy and rising concerns over the fine dust that often blankets the country.

Under the supplementary budget bill endorsed by the Cabinet, the government will spend 4.5 trillion won on a series of measures to boost exports, strengthen the social safety net and create more jobs.

Also the government set aside 1.5 trillion won to combat the deepening fine dust pollution, which has created a stir here over health concerns.

The extra budget bill, to be presented to the National Assembly for approval Thursday, came as the economy is showing signs of a slowdown.

The South Korean government has projected the economy to grow between 2.6 percent and 2.7 percent this year, but the Bank of Korea slashed its growth outlook this year by 0.1 percentage point to 2.5 percent last week, citing heightening economic uncertainties over trade tensions and weakening exports.

Finance Minister Hong Nam-ki (C) explains about the government's 6.7 trillion-won extra budget proposal during a press briefing in the administrative capital of Sejong on April 24, 2019. (Yonhap)

Hong Nam-ki, the minister of economy and finance, said the extra budget could provide a recovery momentum in the second half and contribute to boosting South Korea's economic growth by 0.1 percentage point this year.

"The extra budget bill, if implemented within this year, could give a big boost in reducing fine dust and overcoming downside risks," Hong said early this week.

But the government may consider mobilizing all other policy tools available to boost the economy, Hong said, as there is a limit in overcoming downside risks only with the extra budget.

More specifically, the government set aside 1.1 trillion won to expand trade finance programs to help South Korean companies make inroads into new foreign markets, underscoring the country's desperate efforts to boost exports as outbound shipments fell for the fourth straight month in March.

Other measures include a tailored package program for startups and marketing campaigns to attract foreign tourists, especially from Southeast Asia and China.

South Korea has been struggling to offset its chronic deficit in tourism.

Earlier this month, President Moon Jae-in stressed a need to develop new appealing reasons for tourists to visit South Korea, such as a tour program themed after the Korean Wave of popular culture, or "hallyu."

South Korea sees K-pop and its broader Korean Wave as soft power that can appeal to young people around the world and increase its relevance to them.

The government also said it set aside 2.1 trillion won to further beef up the social safety net, such as unemployment benefits for those between jobs, and vocational training for unemployed people, as well as job creation.

The country's job conditions have improved slightly this year, but a set of policies has failed to offer more quality jobs.

The unemployment rate for young adults -- those aged between 15 and 29 --came to 10.8 percent in March, compared with the overall jobless rate of 4.3 percent.

The government also allocated 1 trillion won to support struggling companies and to build roads and ports while setting aside 300 billion won for the nurturing of talented people in such areas as artificial intelligence (AI) and future cars, as well as for the development of content following the recent commercialization of 5G networks.

The finance ministry said as part of efforts to reduce fine dust, a huge chunk of the proposed extra budget will be used to raise the number of old diesel cars to be scrapped to 400,000 from its initial target of 150,000, with the number of old diesel cars and construction equipment units that are equipped with diesel particulate filters rising to 95,000 and 5,000, respectively.

The devices are designed to remove diesel particulate material, or soot, from diesel engine exhaust.

South Korea said earlier it plans to take all diesel cars -- a key culprit of fine dust emissions -- off the road by 2030.

The government also said it plans to set up a joint forecast system with China on fine dust, install about 16,000 air purifiers in schools, welfare facilities and traditional markets, and dole out anti-dust masks to 2.53 million vulnerable people.

"A top priority is to ensure that the extra budget is quickly endorsed and implemented for an economic turnaround," Hong said on Yonhap News TV.

Still, it remains unclear whether the main opposition Liberty Korea Party (LKP) will support the extra budget, which it has claimed is a politically motivated maneuver for next year's general elections.

The National Assembly is in the midst of heightened partisan tensions as the LKP strongly opposes the ruling Democratic Party (DP) and three minor parties' latest agreement to fast track key bills.

At least 151 out of 300 lawmakers need to be present at the parliament to put a bill to a vote in a plenary session. Of them, a majority of votes, at least 76, is needed to endorse the measure, according to the National Assembly's procedures.

The ruling DP has 128 seats in the 300-member parliament, with the LKP holding 114 and minor opposition parties and independents accounting for the other 58.

The DP plans to press the LKP to participate in parliamentary reviews of the proposed extra budget while highlighting the urgency of injecting money to cope with the latest devastating fire in eastern coastal areas and the fallout of the 2017 quake in the southeastern city of Pohang.

The conservative LKP has called for the drawing up of a new disaster-related extra budget bill.

"We will do our best to persuade the LKP to cooperate in the budget review. The LKP will not be able to stick to its opposition as the budget contains money for the disaster recovery," a DP official said.

Last year, South Korea's parliament approved an extra budget bill of 3.83 trillion won to create jobs for young people and help industrial regions grappling with massive layoffs.

In 2017, the Moon Jae-in government also formed an 11 trillion-won supplementary budget aimed at boosting job creation.

This file photo, taken on May 21, 2018, shows the National Assembly holding a plenary session to vote on the government's proposal for an extra budget to boost the slowing economy. (Yonhap)

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