South Korea Doubles Spending Plan for ‘New Deal’ to Reshape Economy

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South Korea more than doubled its spending plan for President Moon Jae-in’s “New Deal” program to 160 trillion won ($133 billion), underscoring its ambition to recover from the pandemic by reshaping the economy around technology.

The plan announced Tuesday by Moon is one of his biggest economic initiatives since coming to power in 2017. Facing its first economic contraction this year since the Asian financial crisis, the success of the project would help South Korea retain, or boost, its reputation as a regional economic powerhouse.

“The New Deal plan marks the start of a great turn for the Republic of Korea,” Moon said in a televised speech, calling it a “manifestation of the will to fundamentally transform” South Korea.

The plan envisions 1.9 million new jobs created over the next five years and marks a significant increase from the initial 76 trillion won spending plan unveiled in June.

South Korea Doubles Spending Plan for ‘New Deal’ to Reshape Economy

The central government will shoulder 114.1 trillion won of the new spending plan, while local governments and private sectors will contribute 25.2 trillion won and 20.7 trillion won, respectively, according to a statement from the Finance Ministry.

The project takes its cue from President Franklin Roosevelt’s initiative that helped the U.S. recover from the Great Depression in the 1930s, but critics have expressed doubts on the sustainability of government-led job creation. Previous presidents Park Geun-hye and Lee Myung-bak have also called for a boost to tech and new industries in an effort to build new growth engines for a slowing economy.

Moon’s five-year tenure ends May 2022, leaving the implementation of tens of trillions of won in spending earmarked for after that date uncertain.

The government will push to create 567,000 jobs in telecommunication networks, artificial intelligence and other data-intensive industries by 2025 and 143,000 positions in so-called “untact” businesses that include remote schools and hospitals.

Another 193,000 jobs are planned in managing infrastructure such as roads and ports, 659,000 in renewable energy and eco-friendly industries, and 339,000 social safety-related positions, according to the ministry.

The Moon administration has already pledged more than 270 trillion won so far this year to prop up the virus-hit economy, including direct support, loans and funds. Economists still expect the economy to shrink 0.6% in 2020, while the government is more hopeful and sees a 0.1% expansion.

©2020 Bloomberg L.P.

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