South Korea’s Moon Calls for Expansionary Spending Through 2022
(Bloomberg) -- South Korea should keep its budget expansionary through at least next year to ensure a recovery from the pandemic benefits the broader society, President Moon Jae-in said, expressing confidence on the country’s fiscal health.
“It has only been a recovery in half so far,” Moon said at a meeting on Thursday, citing a jobs market that has yet to fully recover. “The expansionary fiscal stance should be maintained through next year to secure a clear economic rebound and ease inequalities caused by Covid-19.”
Fiscal spending has been crucial in helping Korea withstand the economic turmoil from the pandemic. The Bank of Korea on Thursday said it sees the economy, already bigger than its pre-pandemic size, growing 4% this year on the back of exports, investment and stimulus among others.
Korea has implemented five extra budgets to cushion the pandemic shock, including one this year. Moon said Korea should leave the door open for more fiscal injection based on additional tax revenue.
Such call for more spending stands in contrast to monetary policy tightening signals from BOK Governor Lee Ju-yeol, who indicated on Thursday the bank’s next step would be a rate hike.
While fiscal spending helped limit the virus impact on the economy, the spending has pushed debt levels well beyond 40% of gross domestic product, which previous administrations saw as a ceiling to prepare against future needs.
Moon acknowledged a “fast increase” in sovereign debt, but said Korea’s fiscal status remains relatively sound compared to other countries.
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