South Korean Government has finalized that next year’s budget ($426 billion (470.5 trillion KRW)) will be 9.7% higher than that of this year. Out of next year’s budget, $147 billion (162.02 trillion KRW) will be used for jobs and employment and health and welfare.
South Korean Government is going to invest $21.3 billion (23.5 trillion KRW) into creating jobs to resolve current unemployment crisis and it is going to invest more than $18.1 billion (20 trillion KRW) into R&D for the first time. It created Ministry of SMEs and Startups’ (MSS) budget at $9.23 billion (10.2 trillion KRW), which is the biggest ever for this ministry, to promote startups and venture companies. It is going to invest $16.8 billion (18.6 trillion KRW) into industries to help with innovative growth such as reorganization of industrial complexes.
Its plan is to regain active economy by increasing its budget through favorable tax revenue. However, some are raising questions on whether South Korean Government can solve such problem just by ‘increasing its budget’ without correcting wage-led growth policies that have caused its economy to slow down and income distribution to worsen.
South Korean Government held a Cabinet Meeting at The Blue House on the 28th and finalized ‘2019 budget plan’.
South Korean Government finalized 2019 budget to be $426 billion (470.5 trillion KRW) , which is 9.7% ($37.7 billion (41.7 trillion KRW)) more than this year’s budget ($388 billion (428.8 trillion KRW)). 9.7% increase rate is the highest increase rate since it reached 10.6% in 2009 when there was a global financial crisis.
“Considering increase in import due to favorable tax revenue, we are going to increase size of our fiscal payment.” said Minister Kim Dong-yeon of Ministry of Economy and Finance (MOEF). “We are going to create jobs, regain dynamics of our economy, and improve quality of our citizens.”
22% increase rate for budget on jobs is the biggest ever in South Korean Government’s history. It is going to invest $21.3 billion (23.5 trillion KRW) into supporting youth with jobs, providing jobs for experienced middle-aged men and women, and creating jobs (94,000) within social services. This is a response to ‘employment disaster’ in July when increase rate of employed people was only 5,000 people compared to July of last year.
Budget for health and welfare including employment will increase from $131 billion (144.6 trillion KRW) to $147 billion (162.02 trillion KRW). Next year’s budget will include expanding support for low-income families, supporting continuously with stabilization fund for jobs, and establishing payment system just for small businesses.
“South Korean Government has prepared various policies such as increase in basic pension and disability pension, baby bonus payment, drastic increase in employment grant, better basic benefits, increase in support for self-employers, and daily SOC (Social Overhead Capital.” said President Moon Jae-in. “We have drastically applied these policies to next year’s budget.”
Financial support for innovative growth will increase as well as South Korean Government is going to invest $18.5 billion (20.4 trillion KRW), which is $634 million (700 billion KRW) more than this year’s budget for R&D, into next year’s R&D budget that has been about the same for the past 3 years. It is going to invest $4.62 billion (5.1 trillion KRW), which is $1.9 billion (2.1 trillion KRW) more than this year’s budget, into establishing foundation for platform economy. Platform economy is composed of data and AI ($950 million (1.05 trillion KRW), hydrogen economy (99.5 million (110 billion KRW)), training of talented individuals ($317 million (350 billion KRW), and 8 leading projects ($3.25 billion (3.59 trillion KRW)).
Budget for MSS for 2019 will be $9.23 billion (10.2 trillion KRW), which is 14.9% more than this year’s budget at $8.06 billion (8.9 trillion KRW). Next year’s budget will be its biggest budget ever. It is noticeable that South Korean Government drastically increased amount of budget for startup and venture and technology and infrastructure to $802 million (885.5 billion KRW) and $1.23 billion (1.362 trillion KRW) respectively. Next year’s budget for small companies and traditional markets will be $211 million (232.7 billion KRW) higher than this year’s budget at $678 million (751.9 billion KRW).
South Korean Government is going to invest $16.8 billion (18.6 trillion KRW), which is 14.3% higher than this year’s budget for industry, small and medium companies, and energy, in 2019 to strengthen its major industries. Out of next year’s budget that is divided into 12 different fields, industry, small and medium companies, and energy fields have the highest increase rate. Fact that South Korean Government is going to invest $590 million (652 billion KRW) into industrial complex in 2019, which is about 3 times bigger than that of this year’s budget at $149 million (164.1 billion KRW), stands out.
However, effectiveness of increase in budget is questionable although South Korean Government is putting in more money to recover its economy and to solve unemployment crisis. Although South Korean Government invested $48.9 billion (54 trillion KRW) to prepare jobs for the past year, it has experienced limitations in financial effects as situation has become worsened. Some are pointing out that it will be difficult for South Korean Government to overcome current crisis without correcting and improving wage-led growth policies.
“We are going to overcome this difficult times and enhance our economy.” said Minister Kim. “By effectively bringing every policy from finance, tax, regulation, and others, we are going to do our best to improve potential and dynamics of our economy.”
Staff Reporter Yoo, Seonil | ysi@etnews.com & Staff Reporter Mun, Bokyung | okmun@etnews.com & Staff Reporter Sung, Hyeonhee | sunghh@etnews.com & Staff Reporter Cho, Junghyung | jenie@etnews.com