Gov't becoming bigger driver of economic expansion: KDI

The main driver of South Korea's economy is shifting from the private sector to the government, who last year contributed to one-third of the country's economic growth, a think tank said Wednesday.

South Korea's economy expanded 2.6 percent last year, with the government contributing 0.8 percent, according to the Korea Development Institute. State spending helped with 0.5 percent and government investment contributed 0.3 percent. Without such contribution, the country's economic growth last year would have stopped in the 1-percent range, the institute said.

Circumstances are unlikely to change this year, it said. All of the 0.5 percent economic expansion in the first quarter this year came from the government, KDI said.

The government's role in economic growth has been growing for years. In 2011, the state did not add to the 3.7 percent growth, but in 2012, government spending and investment accounted for 0.4 percent of the 2.3-percent growth. In 2013, the government accounted for 0.6 percent of 2.9 percent. The contribution level fell in 2014 to 0.3 percent of 3.3 percent before jumping to 0.8 percent last year, KDI said.

The think tank cites the worldwide economic slump and consequent export slowdown as key reasons for the shift, as private companies withhold investment that result in less hirings.

Corporate facility investments have been in the minus this year -- minus 6 percent in January, minus 7.9 percent in February, minus 7.4 percent in March and minus 2.7 percent in April. (Yonhap)