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Entry 2020.10.05 17:36 | Revision 2020.10.05 17:38
Opinion against the fiscal rules of the ruling party and the disposition of the previous government … Congress passed unknown
With regard to the ‘Korean fiscal rules’ announced on the 5th by Hong Nam-ki, Deputy Prime Minister of Economy and Ministry of Strategy and Finance, economists are accepting as a signal that “indeed, we will observe and see that the debt ratio national increase to 60% of GDP “.
With four additional budgets this year (additional budget), the national debt / GDP ratio this year rises to 43.9%, and it is said that it showed the intention to tolerate this ratio rising to 60% in the next five years. There are criticisms that 40% of the state debt ratio, which was the marginal line of national fiscal management since the IMF (International Monetary Fund) financial crisis, fell to more than 60%.
In particular, voices pointing out that President Moon Jae-in, who criticized the Park Geun-hye administration’s 2016 budget bill, changed his attitude after taking office, saying that “40%, that the Maginot Line was considered to protect financial strength, has been broken, “as leader of the opposition. It is a criticism that the Moon Jae-in administration’s attitude towards fiscal soundness is no different from ‘Naero Nambul (Romance if I am, romance if others)’.
Such comments are evaluated as showing the change in the government’s position on the increasing trend of the national debt. Vice Premier Hong Nam-ki maintained the position that “state debt should be managed in the range of 40% of GDP” even at the National Fiscal Strategy Meeting chaired by President Moon Jae-in in May last year. However, it can be interpreted that the fiscal rule of that day formalized the intention to tolerate an increase in public debt to 60% of GDP.
According to the National Fiscal Management Plan 2020-2024 announced by the government earlier this month, the national debt-to-GDP ratio increased from 37.1% at the end of last year to 43.9% at the end of this year, and then 46.7% in 2021, 50.9% in 2022 and 54.6% in 2023. It is expected to increase continuously to 58.3% in 2024. The Ministry of Information and Transport plans to manage the fiscal deficit integrated into – 3.6% to -4.0% by 2024, before the national debt ratio reaches 60%, and manage the integrated fiscal deficit within -3% from 2025.
However, economic experts criticize the initiative as a manifestation of the intention to give up hands on the management of state debt during the Moon Jae-in administration’s term. So-young Kim, an economics professor at Seoul National University, said: “Generating a fiscal deficit of -3% of GDP every year is a huge increase in public spending.” Tolerating a fiscal deficit of -3% or more until the national debt ratio reaches 60% does not mean another way to manage the debt, “he said.
Professor Kim Sang-bong from Hansung University School of Economics also said, “The fiscal rule is a device that controls the fiscal spending of the lazy government.
Experts pointed out that this fiscal rule has officially collapsed the notion of ‘the marginal line of the ratio of the national debt is 40%’ that previous governments maintained regardless of the conservatives and progress. Previous governments have managed public debt in accordance with IMF guidelines, “It is necessary to manage the national debt ratio so that it does not exceed 60% of GDP in developed countries and 40% in emerging countries.” However, President Moon Jae-in shook off the Korean government’s strong fiscal principles by saying, “What is the basis for the 40% national debt ratio?” At the National Fiscal Strategy Meeting last May.
There is also criticism from inside and outside the government and the politics that such an attitude toward fiscal soundness is inherently bad. President Moon Jae-in harshly criticized the Park Geun-hye administration’s 2016 budget proposal, which exceeded 40% of the national debt ratio as a representative of the New Political Democratic Union in 2015. At the time, the director Executive Moon Jae-in said: “In the 2016 budget announced by the government, the national debt ratio exceeded 40% of GDP for the first time in history,” and said: “40%, which was considered the line marginal to protect financial strength, has been broken. ” He criticized the Park Geun-hye administration saying: “The Kim Dae-jung administration, which started in 1997 amid the currency crisis, turned the administrative fiscal balance into a surplus in 2002 and handed it over to the Roh administration. Moo-hyun, and the Roh Moo-hyun administration also made a surplus for the Lee Myung-bak administration. “
Although it was born after the controversy over South Korea, it is unclear whether the fiscal rules announced by Vice Premier Hong will exceed the threshold of the National Assembly. The Science and Technology Ministry said it has gone through consultations with the Democratic Party Policy Committee, etc., but many of the ruling party’s lawmakers are negative about making fiscal rules. Mainstream members of the ruling party, including Representative Song Young-gil and Representative Park Hong-geun, publicly expressed their opposition to the establishment of the fiscal rules.
Academics who are friendly to the current government’s revenue-driven growth also criticize the Ministry’s position in setting fiscal rules. Ha Jun-kyung, professor of economics at Hanyang University, said: “Due to Korea’s aging population it is progressing at the fastest rate in the world, if the contraction in private consumption is not offset by government fiscal spending, the growth engine may slow and fiscal strength may worsen. ” He pointed out that the fiscal rules that define the scope of public spending are not profitable and can be difficult to follow later ”.
