SEOUL: South Korea will spend a record 386.7 trillion won next year ($320 billion) as President Park Geun Hye looks to lift the economy out of the doldrums with increased government expenditure.
The proposed 2016 budget is 2 trillion won more than this year’s 384.7 trillion won spending plans, which included a supplementary package approved in July.
The government’s debt is expected to climb to a record 40.1 percent of the country’s gross domestic product as the deficit reaches 2.3 percent of the GDP in 2016, the Finance Ministry said in its budget proposal. It said South Korea is expected to have a budget shortfall through 2019. Even so, the size of the planned outlays was smaller than forecast, according to Lee Sang Jae, a Seoul-based economist for Eugene Investment & Securities Co.
“The budget plan puts more emphasis on maintaining fiscal soundness than on supporting growth,” Lee said. “The size of the budget proposed also may mean that monetary policy should be more active in supporting growth next year.”
Even after a series of interest rate cuts by the central bank to a record low and unprecedented fiscal spending this year, Asia’s fourth-biggest economy is under pressure with China’s slowing growth.
Korea’s exports plunged the most since 2009 in August, adding headwinds to an economy that is just emerging from the aftermath of the MERS outbreak that kept tourists away and consumers from getting out and spending.
The won gained 0.3 percent to 1200.72 per dollar in Seoul on Tuesday. Government bonds fell, with the three-year yield rising two basis points to 1.67 percent, Korea Exchange prices show.
