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Prospects mixed for Moon Jae-in’s extra budget

With President Moon Jae-in ordering the establishment of a presidential committee for jobs on his first day of office, the new government is soon to come up with a follow-up fiscal plan to boost employment.

During his presidential campaign, Moon vowed to draw up a 10 trillion won ($8.8 billion) supplementary budget, immediately after taking office, as the first step to support 12,000 new jobs in the public sector starting from the second half of the year. The new jobs will mainly fill a shortage in civil service jobs such as firefighters, social workers and teachers, his camp said two days before Tuesday’s presidential election.

His job creation drive in the public sector comes as the nation’s employment conditions have worsened. The unemployment rate hit a 17-year high of 4.2 percent in April and the jobless rate among people aged 15-29 shot up to 11.2 percent last month, according to Statistics Korea.
(Yonhap)
(Yonhap)

Under Korean fiscal law, the government can allocate an extra budget only under limited circumstances including the breakout of a war, natural disaster, a significant economic downturn or mass unemployment.

In 2015, the Finance Ministry had requested a supplementary budget of 11.6 trillion won to support those hit by the outbreak of the Middle East respiratory syndrome and a severe drought. It had asked for 11 trillion won in 2016 to ease the fallout from the Brexit decision and massive restructuring in the shipbuilding and shipping sectors.

An official at the Finance Ministry declined to comment on whether the latest unemployment data would satisfy the need for an extra budget.

“We haven’t received any message from Cheong Wa Dae yet (about an extra budget). We will be able to discuss the matter only after the Cabinet appointments have been completed,” an official at the Finance Ministry’s planning and coordination division said.

Even if an extra budget is drawn up, it needs to win a majority vote in the National Assembly, where the ruling Democratic Party of Korea has only 120 seats out of the total 300.

But six out of 12 economists surveyed by Bloomberg expected that a 10 trillion won extra budget would still get parliament approval.

Kang In-soo, head of the private think tank Hyundai Economic Research Institute, noted that the extra budget plan is likely to go on as planned because the new administration’s policy drive is usually the strongest in the first several months.

“Even though there could be controversy over the need for an extra budget, the jobs issue was the president’s strongest pledge, and youth unemployment remains very high. Moreover, there is a social consensus already formed around the need to boost jobs,” Kang told The Korea Herald.

“It will pass the National Assembly, I think. But Moon’s plan on jobs also needs a careful review on whether the existing jobs in the public sector have any room for improvement in efficiency, because once the number of public jobs is boosted, it will be almost impossible to reverse it.”

By Kim Yoon-mi (yoonmi@heraldcorp.com)
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