Moon administration to propose largest budget in South Korea’s history
Today, South Korea’s Ministry of Finance will propose its budget bill for the next fiscal year to parliament, which has until early December to deliberate on and approve it.
Amid a continuing US-China trade war, worsening trade relations with Japan and slowing global demand, South Korea’s export-dependent economy is preparing for one of its slowest periods of growth since World War Two. Government estimates pin growth for the upcoming year at 2.2%, down from 3.1% in 2018, but private-sector estimates predict as low as 1.4%.
To dampen a bleak medium-term outlook, the bill proposes an 8% budget increase, the most aggressive since the 2008 financial crisis, to allow for greater government spending. Expenditures will focus on welfare, job creation, the environment and research and development–particularly in 5G networks and artificial intelligence, both thought to be long-term growth engines.
The expansive budget, coupled with a likely drop in interest rates from 1.5% to 1.25% in October, will work to maintain stability over the coming year. However, if the global economy continues to slump amid sluggish trade and government spending remains high, Seoul might need to contend with mounting public debt in the long-term.
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