Korea’s welfare spending to jump after elections: report

South Korea’s welfare related spending is expected to jump by more than 50 trillion won ($44 billion) though such a development will not adversely affect the economy, a report showed Tuesday.

According to the Korea Center for International Finance report based on predictions made by global investment banks, outlays to bolster the country’s welfare infrastructure are inevitable outcomes of last week’s parliamentary elections.

Both conservative and liberal parties pledged to strengthen welfare programs to win votes.

Foreign IBs such as Bank of America, Merrill Lynch and JP Morgan said that while all parties promised to increase welfare by trillions of won, such a move will not really disrupt the national economy and the financial sector.

They also said that because the ruling Saenuri Party, which advocated sustainable welfare programs, won a majority 152 seats in the 300-seat National Assembly, any fallout will be very limited.

Saenuri supports increasing welfare outlays but objects to raising taxes or increasing state debt.

The KCIF said IBs predicted that with parliamentary elections over, a key economic uncertainty has been lifted, which is good news for economic actors.

Others such as Morgan Stanley and Goldman Sachs said Seoul will try to control inflation and seek to push for stable economic growth. They added that the government will also take steps to fuel domestic demand and spend more on public infrastructure works leading up to the critical presidential elections set for December.

Related to expenditures, Fitch Ratings, one of three leading credit rating agencies, said Seoul’s welfare outlays may be around 89 trillion won, but such a move will not really affect the country’s fiscal health.

Foreign IBs, meanwhile, predicted South Korea’s labor market should do well in the coming months mainly due to demand for workers in the service sector. 

(Yonhap News)