Gov't to cut growth target to 2% level by injecting extra $ 5.8 billion

Gov't to cut growth target to 2% level by injecting extra $ 5.8 billion. May. 23, 2016 07:37. by 세종=손영일 기자scud2007@donga.com.

The Korean government has decided to lower this year’s economic growth target from 3.1 percent to the upper 2 percent level, and to inject more than 7 trillion won (5.87 billion U.S. dollars) in extra funds to the state finances in the second half of this year. The government also plans to significantly increase budgets related to corporate restructuring and unemployment when setting next year’s state budget, rather than setting aside extra budget for corporate restructuring to the state budget (this year).

According to the Strategy and Finance Ministry on Sunday, the government has prepared the "direction of economic policy for the second half," which calls for these and other measures, and plans to announce it in late June. For one, the government is set to boost the state finances by more than 7 trillion won (5.87 billion dollars) by mobilizing investments by state-run companies including KEPCO and Korea Land and Housing Corp. and various funds. The government will have preemptively implemented about 60 percent of this year’s annual budget in the first half. Internal and external economic situations are so unfavorable that the government inevitably has to cut the economic growth target to the 2 percent level.

The government has reportedly decided to inject extra funds to the state finances, but avoid setting aside extra budget at the central government level, which it did last year. Since setting aside extra budget requires parliamentary approval, the process from budgeting to parliamentary approval takes quite some time. Given that formation of the 20th National Assembly is expected to be completed around July, it is most likely that review of the extra budget will coincide with review of next year’s annual state budget. Extra budget that entails issuance of government bonds directly leads to extra debts in the national account, which poses another burden. The government has thus decided to set the direction to creating a "super budget," but some insiders in the political circle and the government insist on creating extra budget, which is seen as a remaining variable.