Korea's new economic team lays out plan to cut off low-growth trendUpdated: 2014-07-25 07:41:56 (KST)
Korea's new economic team is all geared up to shake the country out of its low-growth rut.
Finance Minister Choi Kyung-hwan said Thursday that the government will seek aggressive fiscal policies that will boost spending by some 12 trillion won, or roughly 11 billion U.S. dollars in the second half of this year.
The government will also set aside around 28 billion dollars in loans and funds to promote corporate activities.
"To solve structural problems the economy is now facing, and to maintain fiscal balance in the long term, it's critical to seek expansionary fiscal and monetary policies, even at the risk of running a short-term fiscal deficit."
Choi says the earnings of local exporters are not flowing into households, which is stifling domestic demand.
To address the issue, the government laid out plans to provide tax incentives to companies that raise wages and increase dividend payments.
"Korean companies' dividend payout ratio is the lowest among OECD nations. That's affecting the local capital market and keeping corporate earnings from flowing into households."
The government, on the other hand, will tax companies that shy away from investment, wage increases or dividend payments in favor of hanging onto excessive cash reserves.
The government also plans to accelerate regulatory reforms, especially those linked to bolstering the nation's real estate market, by giving home buyers easier access to mortgage loans.
The set of measures is based on the new economic team's revised growth outlook for this year.
It cut its growth forecast to 3.7 percent, down zero.4 percentage points from an earlier projection.
"The government says that the key to getting the economy back in a full recovery phase is boosting domestic demand which was hit hard by the ferry tragedy in April."
Hwang Ji-hye, Arirang News."
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