Stimulation of Economy by Spending Money – Remedial Result Unknow

Most of 10 trillion won of the budget, which was decided to be spent by the end of the year, is to be invested to the construction business. It was intended to increase the employment and to revive the domestic demand. However, the effect is still unclear since the means of boosting the sagging economy is focused on the stimulation of the domestic demand. While half of the major factors of the sagging economy are due to the slowdown of exports, encouraging the domestic demand alone has limitations.

- Focus on the revival of the construction economy by spending money: 10 trillion won was made up by the supplementary budget and the leftover budget carried forward. The government announced at the special National Assembly in June that the government could not be involved in the supplementary budget because the local autonomous organization should decide for the use. However, the government changed the use to spend the money on the equipment investment. The government intends to use most of the 1.6 trillion won of local education finance grants out of 3.6 trillion won of local grants to expand or build the classrooms of the elementary, the middle school, and the high school. The government`s plan to pay the debts of the local autonomous organizations` education finance has changed to the investment in construction to boost the economy. The government also intends to use 2 trillion won of the local finance grants for the construction business.

Leftover budget, which was not used due to different reasons, is to be invested to boost the economy. Kim Yong-Kwha, director of the Comprehensive Policy in the Ministry of Finance and Economy said that ``the last year`s leftover budget carried forward this year, discussed by each ministries, is 8.2 trillion won in total. Regarding this as 4.1 trillion won, the government intends to encourage the execution of this money for the investment business.`` 900 billion won, which was planned to be invested to the state-run companies next year, is to be spent to boost the construction economy this year.

Ministry of Commerce, Industry, and Energy focused on complementing the government`s supporting measures by lessening the burden of the export companies and by expanding the related budget. It was evaluated that the government accepted the most of the business circle`s requests by expanding the companies which are excluded from 200 percent of debt rates, which were limited to only 4 businesses such as general trading companies, airplane, marine transportation, and construction, and by expanding companies which are excluded from the credit limit, which was limited to the credit exports that are expired within 6 months.

- Will the financial policy to boost the economy be effective? The government intends to spend money within this year without drawing up a supplementary budget. The government`s measures that were announced yesterday was simply listing the contents, which was confirmed at the economy minister`s talk on July 24th. Experts agree that if the government`s measures, which are focused on the revival of the domestic demand, can produce remedial result, the government should boost the economy without violating the principle of the structural adjustment.

Ministry of Economy and Finance said that it will prepare the additional measures by monitoring various domestic and international indices, which will be announced at the end of August. A high-ranking official of the Ministry of Economy and Finance said, ``The government will decide to propose additional measure by comprehensively monitoring the industry production activities in July, consumer prices, employment trend, and the economic situation of the U.S. and Japan.`` However, it seems that additional measures will be restrictive as the Ministry of Budget and Planning says that it `does not have any money` for the second supplementary budget.

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