Finance minister wary of fiscal expansion

South Korea’s finance minister on Tuesday expressed reservations about increasing the country’s fiscal spending in the face of an uncertain economic future.

“Since it is hard to predict the country’s economic future and using fiscal policies can actually fuel market volatility, it may be advisable to take a more cautious stance,” Bahk Jae-wan told a meeting of senior economic policymakers.

Maintaining a fiscal balance is a vital safety net in setting macroeconomic policies and it is unwise to use state money to help the economy at present, the minister stressed.

“Before the situation gets worse, it is prudent to improve the country’s fiscal health so it can deal with any contingencies down the line,” he said.

The remarks come after some politicians and economists have called for more aggressive fiscal spending to counter fallouts as the global economy struggles with the eurozone crisis and the slowdown in the United States.

Bahn, in addition, said that instead of trying to spend more money, there is a pressing need for countries around to world to reduce their national debt and fiscal deficits.

Seoul’s fiscal health is better compared to many other countries, but there is a need to maintain fiscal health because the country needs to cope with a rapidly aging population, market liberalization and the cost of unification with North Korea, he said. 

(Yonhap News)