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(2nd LD) Moon urges use of full fiscal capability against 'wartime-like' economic crisis

All News 19:52 May 25, 2020

(ATTN: UPDATES with briefing on meeting results in paras 12-18)
By Lee Chi-dong

SEOUL, May 25 (Yonhap) -- President Moon Jae-in called Monday for "wartime-like" aggressive fiscal policy to cope with the economic crisis from the COVID-19 pandemic, dismissing a burgeoning public concern about South Korea's fiscal soundness.

"The bottom of the global economy is invisible. This is indeed an economic wartime situation," he said during an annual national fiscal strategy meeting at Cheong Wa Dae.

He stressed the need to mobilize all of the government's fiscal capabilities on par with a wartime fiscal operation.

President Moon Jae-in (C) speaks during the National Fiscal Strategy Meeting at Cheong Wa Dae in Seoul on May 25, 2020. (Yonhap)

The president urged the speedy allocation of another batch of supplementary budgets, saying South Korea still has room for expansionary fiscal policy in comparison with other OECD member states.

"Our national debt ratio stays at the level of 41 percent," taking into account the two previous extra budgets against the economic impact from the virus, he pointed out.

The average debt-to-GDP ratio of OECD members reaches 110 percent, he noted.

It's important to overcome the serious crisis swiftly and seek the recovery of fiscal health from a long-term perspective, which is a way to prevent the worsening of the debt proportion, Moon said.

He was emphasizing the importance of speedy and timely fiscal measures.

The government is preparing to submit a third extra budget bill and Moon asked the National Assembly to approve it next month.

South Korea has already allocated 23.9 trillion won (US$19.2 billion) of supplementary budgets since the coronavirus outbreak early this year.

"(State) finances should play a role as a treatment for the ongoing economic crisis and a vaccine to strengthen the fundamental and immunity of the post-coronavirus economy," he said.

Other participants in the annual session included senior presidential aides, top government officials, including Prime Minister Chung Sye-kyun, and ruling Democratic Party leaders.

They agreed that it's necessary to expand fiscal spending in a preemptive and aggressive manner to stop economic troubles from deepening and stimulate growth, according to Cheong Wa Dae spokesman Kang Min-seok.

Cheong Wa Dae, the government and the party also agreed to strengthen efforts to improve fiscal soundness over the mid- to long-term after South Korea rides out the coronavirus crisis, Kang said in a press briefing on the results of the meeting.

Among measures to be taken are concentrating investment resources on fostering "innovative and inclusive" growth and increasing tax revenues through tougher monitoring of tax evasion and more efficient management of state-owned assets, he added.

The ruling party chief, Rep. Lee Hae-chan, meanwhile, talked about "social agreements" as a method to resolve pending issues.

"It may be an opportunity now to resolve structural problems via social agreements," he was quoted as saying. Lee cited SK hynix, a leading memory chipmaker, as an exemplary case.

"It was not the government and the management that spearheaded restructuring. Labor took the lead to enhance productivity and make it a good company," he said.

The 2020 National Fiscal Strategy Meeting is under way at Cheong Wa Dae in Seoul on May 25, 2020. (Yonhap)

Some media here have raised worries about the fiscal soundness of Asia's fourth-biggest economy.

The ruling party is reportedly pushing for a third extra budget bill worth over 40 trillion won.

The Moon administration has also announced plans to pour 250 trillion won into helping companies maintain jobs, insulate key industries, support small and medium-sized enterprises, the self-employed and other vulnerable people.

Separately, the government is handing out direct cash payments of up to 1 million won to all of the country's households.

On the monetary policy side, South Korea's central bank slashed the benchmark interest rate by 0.5 percentage point to a record low of 0.75 percent in March.

Many analysts predict the Bank of Korea will cut it once again this week.


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