By Kim Jae-kyoung
Staff Reporter


The government decided to spend a total of 100 trillion won, or 59 percent, of next year’s budget in the first half in a move to attain 5 percent economic growth and create more than 400,000 jobs.

The decision came at a meeting of economic ministers and presidential advisers, chaired by President Roh Moo-hyun, to finalize the macroeconomic management plan.

According to the Ministry of Finance and Economy (MOFE), the government will spend 59 percent of the next year’s total budget or 100 trillion won for the first six months, up from 55 percent, or 87.5 trillion won, in 2004.

In particular, the government will spend around 1.01 trillion won (80 percent) of the government’s budget earmarked for job creation and small businesses during the January-June period, the MOFE added.

The increase in fiscal spending under the management plan is based on predictions that private consumption and facilities investment may slacken further in the new year.

Consumer sentiment is expected to deteriorate further next year, with the consumer survey index for future spending falling to a four-year low in the fourth quarter, according to the Bank of Korea (BOK).

Moreover, in order to prevent the construction business from slipping into a further downturn, the government plans to do its utmost to speed up the implementation of its comprehensive investment project known as the ``Korean New Deal.’’

To this end, the government plans to wrap up a detailed plan for the project in the first half of next year so that the project could help the economic recovery from the second half.

The state investment project is aimed at enhancing the private construction business by encouraging the private sector to participate in public construction businesses.

At the same time, the government will make more effort to boost venture businesses and small companies to inject new vigor into the economy.

Under the management plan, the government will try to keep the consumer inflation rate at the low 3-percent range in the coming year, while controlling the jobless rate at the mid 3-percent range.

The government expects that the nation will post a current account surplus of around $20 billion, down from this year’s estimated $28 billion.

The adoption of multiple policies _ fiscal spending and investment projects _ indicates the government’s perception that under the current situation, just one stimulus measure is unable to revive the economy because there are various unfavorable factors for the economy.

In its management plan, the government expresses special concerns about soaring oil prices, the won’s appreciation against the dollar and a possible downturn in IT businesses.

These factors, coupled with increasingly ineffective macroeconomic policy tools _ fiscal and monetary policies _ have led the government to judge that one policy alone is not enough to boost the economy.

However, despite the government’s such double efforts to prop up the slumping economy, most private economists believe that the economic growth rate will not reach the government’s target of 5 percent next year.

The BOK and the Korea Development Institute predicted the economy would grow by around 4 percent, while the Samsung Economic Research Institute put the rate at 3.7 percent.

The Asian Development Bank forecast that Korea will suffer from a deepening economic slump next year with its growth among one of the lowest of 10 East Asian nations, citing an anticipated slowdown in exports.

In its semiannual economic outlook report, the Manila-based organization predicted that Korea will post an economic growth of 4.2 percent next year, the lowest among 10 East Asian economies, excluding Cambodia (2.3 percent).

kjk@koreatimes.co.kr