The government has allocated more than 70 percent of its annual budget spending for the first six months of the year to jolt the struggling economy in the face of uneven global conditions.
According to a report by the Ministry of Strategy and Finance, Thursday, 45 percent of the budget will be spent in the first quarter and 27 percent in the April-June period. The 72 percent of annual expenditure assigned for the first half, which amounts to 298.4 trillion won (about $280.7 billion), was slightly more than the 70 percent set aside for the same period last year.
The frontloading of the budget, approved during a Cabinet meeting, comes at heady times for the country’s economy, which is encountering fears that the spread of the global downturn will compromise its strength in exports when the erosion in family finances has beaten domestic consumer demand into a coma.
Most of the money spent in the first half will be dedicated to infrastructure investments and other job-creating schemes, the ministry said.
The National Assembly approved a revised national budget of 342 trillion won for 2013, Tuesday, trimmed from the government’s initial proposal of 342.5 trillion won.
``It appears that the uncertainty in the global economy will drag out longer than what we had hoped for. This requires a budget frontloading to preemptively respond to the possibilities of a slowdown,’’ the ministry said in an e-mailed statement.
``We will concentrate 72 percent of the main government budget during the first half of this year in order to achieve our goal of spending about 60 percent of the overall national budget, which includes spending plans for public institutions, in the same period.’’
The disastrous vortex of worsening global conditions, spiraling debt and unemployment will likely continue to torment the incoming Park government as much as it did Lee Myung-bak’s administration. And while the country’s immediate problems are heady enough, of greater concern are the mid- to long-term challenges posed by an aging workforce, which economists warn could become a growth buster.
The ministry recently lowered its annual growth estimate for this year from 4 percent to 3 percent, admitting to the existence of significant downside risks.
This was lower than the 3.2 percent forecast put forth by the Bank of Korea (BOK) and 3.6 percent by the International Monetary Fund (IMF). With so much room for things to turn for the worse, the possibility of fiscal and monetary stimulus seems to be in play.