South Korean President Moon Jae-in, on Monday, called 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.
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He stressed the need to mobilise all of the government’s fiscal capabilities on par with a wartime fiscal operation.
The president urged the speedy allocation of another batch of supplementary budgets, saying South Korea still had room for expansionary fiscal policy in comparison with other member states of The Organisation for Economic Co-operation and Development (OECD).
“Our national debt ratio stays at the level of 41 per cent,” 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 per cent, he noted.
Moon underscored the importance of swiftly overcoming the serious crisis and seeking the recovery of fiscal health from a long-term perspective, which is a way to prevent the worsening of the debt proportion.
He was emphasising the importance of speedy and timely fiscal measures.
According to him, the government is preparing to submit a third extra budget bill.
He 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.
Some media here have raised worries about the fiscal soundness of Asia’s fourth-biggest economy.
The ruling Democratic 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 per cent in March.
Many analysts predict the Bank of Korea will cut it once again this week.
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