Doubts raised over feasibility of incoming administration's key economic policies

President-elect Yoon Suk-yeol speaks during a meeting of the transition committee at its office in Jongno District in central Seoul, Tuesday. Joint Press Corps

By Yi Whan-woo

Key economic pledges of President-elect Yoon Suk-yeol on fiscal policies, real estate and banking appear to be unattainable or require a considerable amount of time to achieve, as shown by a list of 110 major policy tasks announced by the incoming administration.

The transition team came up with the 110 tasks following debates and research on whether Yoon's pledge should be kept or modified to adapt to changing social and economic circumstances following his election win on March 9.

On budget spending, the incoming government is likely to follow the outgoing Moon Jae-in administration's expansionary fiscal policy despite accusing it of snowballing national debt.

The transition committee said the incoming government will need 209 trillion won ($165.3 billion) more than this year's government budget to implement all of the tasks.

The amount was finalized by postponing Yoon's pledge to raise the monthly wage of enlisted soldiers to 2 million won by 2025. The president-elect had promised to raise their salary immediately when he takes office on May 10, and if implemented, would require far more than 209 trillion won.

The transition committee vowed to finance the 209 trillion won by restructuring the budget as well as increasing tax revenues.

But it remains unclear if it will be able to raise the money.

For instance, the transition committee's chairman Ahn Cheol-soo said the incoming government will be able to squeeze out 20 trillion from the 2022 budget worth 600 trillion won, but did not specify how the remaining 580 trillion won can be prepared.

Ahn also did not specify how much taxes are expected to increase amid a bleak economic outlook, as seen from the International Monetary Fund revising down Korea's projected economic growth from 3 percent to 2.5 percent for this year.

“The incoming government will have a lot to worry about when it comes to taxation as the economy is slowing down,” said Woo Seok-jin, an economics professor at Myongji University. “The problem associated with tax revenue will get more serious as the Ukraine crisis, spike in oil and commodity prices as well as other external risks can further threaten the economy.”

Concerning real estate, the transition committee did not suggest details on a planned overhaul of the capital gains tax for multiple home owners and the so-called comprehensive real estate tax levied on those who own expensive homes worth 1.1 billion won or more in value.

Yoon has accused the Moon administration of applying punitive regulations on multiple home owners.

On banking policy, Yoon sought to tackle a widening gap between commercial banks' rates for loans and deposits amid growing income polarization, as seen from lenders' soaring interest income and record earnings in contrast to snowballing household debt during the pandemic.

Yoon's move to intervene to narrow the rate gap, however, prompted concerns that it contradicts his broader market-driven economic vision.

The transition committee accordingly said the incoming government, instead of intervening on the case directly, will have banks disclose details of lending rates every month, from the current requirement of announcing them every three months.