[THE INVESTOR] The government is increasingly becoming the main driver of Korea’s economy by contributing to one-third of growth last year, surpassing the private sector, a think tank said on July 13.

South Korea’s economy expanded 2.6 percent last year, with the government contributing 0.8 percent, according to the Korea Development Institute. State spending helped with 0.5 percent and government investment contributed 0.3 percent. Without such contribution, the country’s economic growth last year would have stopped in the 1-percent range, the institute said.

Circumstances are unlikely to change this year, it said. All of the 0.5 percent economic expansion in the first quarter this year came from the government, KDI said.

The government’s role in economic growth has been growing for years. In 2011, the state did not add to the 3.7 percent growth, but in 2012, government spending and investment accounted for 0.4 percent of the 2.3-percent growth. In 2013, the government accounted for 0.6 percent of 2.9 percent. The contribution level fell in 2014 to 0.3 percent of 3.3 percent before jumping to 0.8 percent last year, KDI said.
The think tank cited the worldwide economic slump and consequent export slowdown as key reasons for the shift, as private companies withhold investment that result in less hirings.


(theinvestor@heraldcorp.com)