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Moon urges more expansionary budget spending, signals no shift in key economic policy

President Moon Jae-in said Thursday his liberal administration is determined to maintain its expansionary fiscal policy and continue efforts to revitalize civilian investment in response to deepening woes facing Asia's fourth-biggest economy.

Moon reiterated that South Korea, like many other countries, is suffering economic troubles due to such external factors as trade disputes and the sharp shrinking of the global manufacturing sector.

President Moon Jae-in (Yonhap)
President Moon Jae-in (Yonhap)

He was apparently undaunted by attacks from political opponents, who claim that the government's "wrong" economic policies are one of the main culprits behind the nation's current economic difficulties. They have urged the Moon administration to change tack.

"Now is the time to concentrate power on the economy and the people's living," he stressed at the outset of a rare separate meeting with his economy team.

It was held at the government office complex in Gwanghwamun, Seoul, with Finance Minister Hong Nam-ki, who doubles as deputy prime minister for the economy, absent, as he was on a visit to the United States for Group of 20, International Monetary Fund and World Bank meetings.

The session was not included in the president's weekly schedule open to Cheong Wa Dae press corps in advance. On Wednesday afternoon, Cheong Wa Dae suddenly announced Moon's plan to hold the meeting.

It came a couple of days after the IMF slashed its growth forecast for South Korea's economy this year to 2 percent from its previous outlook of 2.6 percent.

Also, the Bank of Korea lowered the main policy rate to 1.25 percent Wednesday amid worries about the possibility of deflation.

South Korea's export-driven economy is especially vulnerable to external conditions, Moon pointed out.

Above all, he said, enhancing the civilian sector's vigor is necessary to boost the economy.

"In order to ride out the declines in exports and investment, attributable to a global economic slowdown, the government should provide more support for exporting companies and play an active role promoting private investment," Moon said.

He said the government plans to increase investment in the construction sector, while sticking to the principle of avoiding a campaign to "artificially stimulate" it.

The government will have to advance the supply of houses for low- and middle-income people and begin the construction of planned metropolitan transportation networks at an early date, he added.

Moon also vowed to increase public investment in social overhead capital.

"When the economy is in difficulty, it's a must do for the government to expand fiscal spending to reinforce the economy and inject a vigor into the economy," he emphasized.

It was Moon's first separate gathering with economy-related ministers since he presided over an "expanded meeting" with them at Cheong Wa Dae last December.

Moon's move is seen as reflecting his resolve to oversee economic affairs in detail and in person amid growing concerns about his economic record, in particular ahead of the general elections next spring. (Yonhap)