South Korean President Moon Jae-in said on Monday unemployment was “very serious” and it could turn into a national catastrophe unless addressed, and urged parliament to pass a proposed extra budget to put more people to work. Moon made a lengthy speech at the National Assembly to explain why the economy needed a boost in fiscal spending of 11.2 trillion won ($9.95 billion) in the second half of this year, which is aimed at creating 71,000 public sector jobs and 15,000 private sector jobs. “If we leave our current jobless situation as is, there are concerns it may later return to us as an economic crisis equaling a national catastrophe,” said Moon in an unprecedented call for an extra budget.
His parliamentary address is the first ever on an extra budget by a president, underscoring his commitment to his job-creation agenda. Moon, who won a May election, promised to create 810,000 public sector jobs within his single five-year term, hoping to resolve soaring youth unemployment hovering near a record high of 11.2 percent as of April this year.
Both parties in the conservative opposition – the Liberty Korea Party and the Bareun Party – have opposed the proposed extra budget, posing a challenge to Moon’s ruling Democratic Party in passing the bill as it needs the support of more than 30 opposition lawmakers. Moon’s party only holds 40 percent of the 299 seats in the National Assembly. In his speech, Moon also said income inequality was worsening in Asia’s fourth largest economy, and the government can help to resolve it if the National Assembly approved the extra budget designed to boost jobs and household income.
About 8.8 trillion won of the extra budget will be financed by excess tax revenue expected this year, while the remaining 2.4 trillion will come from government revenue left over from 2016 and public funds managed by state-owned companies. The supplementary budget will add to the 400.5 trillion won budget for 2017 that was approved by the National Assembly late last year. Separately, the central bank said monetary policy needed to stay accommodative to support the economy, but adjustments should be reviewed if growth remained strong.
“For now, the accommodative stance in monetary policy needs to be maintained,” Bank of Korea Governor Lee Ju-yeol said in a speech celebrating the bank’s 67th anniversary. “Having said that, if economic recovery continues and shows clear signs of improvement, we may need to adjust the pace of monetary policy easing so we will need to thoroughly review such cases.” Lee said he saw upside risks to the bank’s economic growth estimate of 2.6 percent for this year, thanks to improving exports and the supplementary budget proposed.
But for now, uncertainty remained high and inflationary pressure was not strong, which meant the bank should maintain its current record-low interest rate of 1.25 percent for the time being, he said. South Korea’s economy grew 1.1 percent in January to March on a seasonally adjusted basis, its strongest in six quarters. Most analysts believe the central bank will keep borrowing costs unchanged for the rest of this year, before it considers starting to normalize rates next year.