Expansionary fiscal operation needed to overcome COVID-19 shock?
While comparing the economic shock of COVID-19 to a "warlike situation," President Moon Jae-in stressed the need for expansionary fiscal policies, Monday. "The global economy is falling into a bottomless pit, and the Korean economy is no exception," the President said. "The urgent question now is for whom and what we should implement fiscal policy."
At a time when the spread of the coronavirus is sharply eroding both exports and domestic consumption, driving many businesses into a financial crisis and leaving numerous workers out of a job, the sufficient input of fiscal resources is a must to put out the fire in the initial stages.
Critics of the government, however, are voicing concerns about a possible worsening of the country's fiscal health. Moon's remarks were the answer to such criticism; a reminder that excessive worries about fiscal soundness should not lead to missing the right time for fiscal spending to save the economy.
It is common sense that massive government spending is necessary to keep the national economy from sliding into a severe slump. Besides, renowned economists, both here and abroad, say the world is facing the worst crisis since the Great Depression of the 1930s. The International Monetary Fund has forecast that the Korean economy will contract 1.2 percent this year.
Unless the government copes with the current situation more actively, Korea Inc. can't help but fall into a deeper pit. The government should put up with the slight aggravation of the nation's fiscal health to ensure the economy's soft landing. Most urgent in this regard is to come up with a third supplementary budget swiftly. As with most extra budgets, the success of the upcoming one will depend on the speed and timing of its creation and parliamentary approval.
Korea's national debt ratio remains at 41 percent of its gross domestic product, far lower than the OECD members' average of 110 percent. Nevertheless, the fiscal authorities should save every penny possible through the restructuring of budget expenditure while boldly pouring financial resources into essential sectors. That will also help Korea secure national competitiveness in the global economy after COVID-19 is over.
While comparing the economic shock of COVID-19 to a "warlike situation," President Moon Jae-in stressed the need for expansionary fiscal policies, Monday. "The global economy is falling into a bottomless pit, and the Korean economy is no exception," the President said. "The urgent question now is for whom and what we should implement fiscal policy."
At a time when the spread of the coronavirus is sharply eroding both exports and domestic consumption, driving many businesses into a financial crisis and leaving numerous workers out of a job, the sufficient input of fiscal resources is a must to put out the fire in the initial stages.
Critics of the government, however, are voicing concerns about a possible worsening of the country's fiscal health. Moon's remarks were the answer to such criticism; a reminder that excessive worries about fiscal soundness should not lead to missing the right time for fiscal spending to save the economy.
It is common sense that massive government spending is necessary to keep the national economy from sliding into a severe slump. Besides, renowned economists, both here and abroad, say the world is facing the worst crisis since the Great Depression of the 1930s. The International Monetary Fund has forecast that the Korean economy will contract 1.2 percent this year.
Unless the government copes with the current situation more actively, Korea Inc. can't help but fall into a deeper pit. The government should put up with the slight aggravation of the nation's fiscal health to ensure the economy's soft landing. Most urgent in this regard is to come up with a third supplementary budget swiftly. As with most extra budgets, the success of the upcoming one will depend on the speed and timing of its creation and parliamentary approval.
Korea's national debt ratio remains at 41 percent of its gross domestic product, far lower than the OECD members' average of 110 percent. Nevertheless, the fiscal authorities should save every penny possible through the restructuring of budget expenditure while boldly pouring financial resources into essential sectors. That will also help Korea secure national competitiveness in the global economy after COVID-19 is over.
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