Effects of extra budget

Policymakers should do more to stimulate economy

The Moon Jaein administration's third supplementary budget plan is aimed at tackling the worsening fine dust problem and giving a boost to the slumping economy. For this, the government proposed 6.7 trillion won ($5.8 billion) in extra spending Wednesday. It will submit the bill to the National Assembly the next day.

However, the passage of the bill is up in the air due to the political deadlock between the rival parties over electoral reform and the creation of a new body to investigate corruption involving high-ranking officials, judges, prosecutors and police officers. This impasse, if drawn out, is likely to further delay the approval of the extra budget.

The main opposition Liberty Korea Party (LKP) has made it clear that it would block the passage of the bill. The party has already begun to boycott the operation of the Assembly after the ruling Democratic Party of Korea (DPK) and minor opposition parties agreed to fast-track the bills on electoral reform and the new investigative body.

It is bad to see the budget proposal languish at the Assembly because of the partisan feud. The longer the budget bill is delayed, the more difficult it becomes to reverse the economic slowdown and fight the fine dust issue. Timing is especially crucial for the extra outlays to achieve their intended effects.

For this reason, the Moon government should first try to break the political deadlock hampering the operation of the Assembly. A unilateral push for any reform bill or an extra budget plan will only end in partisan confrontation and political bickering. Therefore it is imperative to restore bipartisanship, particularly on economic matters.

Another problem is what effects the supplementary budget proposal can bring about to speed up economic recovery. Economy and Finance Minister Hong Namki said the budget could provide a recovery momentum in the latter half of the year and contribute to boosting economic growth by 0.1 percentage point this year.

Yet such a boost is not good enough to help the government's growth target of 2.6 percent to 2.7 percent this year. The administration plans to allocate 4.5 trillion won for economic stimuli, including livelihood support for the poor. The remaining 2.2 trillion won will be spent on fine dust reduction as well as public safety and disaster relief.

Last week the Bank of Korea revised down its growth projection to 2.5 percent from 2.6 percent. LG Economic Research Institute also lowered its outlook from 2.5 percent to 2.3 percent due to the global economic downturn. Moody's Investors Service became more pessimistic by predicting the Korean economy to grow at a much slower rate of 2.1 percent.

Policymakers must keep in mind that an extra budget is only a necessary condition, but not a sufficient one for economic revival. They should take more comprehensive and fundamental measures to avoid rising downside risks and ensure sustainable growth.