Gov't proposes 2017 budget in excess of record 400 trillion won

The South Korean government aims for a 3.7 percent increase in its spending next year to push the annual budget above the 400 trillion won ($358 billion) mark for the first time, with steep rises planned for youth job creation, expansion of custom-made welfare benefits and stabilization of public livelihoods, the finance ministry said Tuesday.

The proposed 2017 budget calls for boosting spending on job creation, education, defense, and culture and tourism by 10.7 percent, 6.1 percent, 4 percent and 6.9 percent, respectively, as the government will reinforce its bid to jump-start Asia's fourth-largest economy suffering from faltering exports and flaccid domestic demand.

The government will ask the National Assembly to approve 400.7 trillion won in spending for 2017, up from 386.4 trillion won assigned for this year, according to the Ministry of Strategy and Finance. The amount is some 5 trillion won more than what was initially planned.

The budget proposal, which was endorsed at a Cabinet meeting on Tuesday, will be submitted to the parliament by Friday, which is required to pass the bill by Dec. 2 under the Constitution.

It is the first time that the government's proposed budget has surpassed the 400 trillion-won mark, indicating the government has been on an expansionary stance for more than a decade. The budget proposal surpassed 200 trillion won in 2006 during the Roh Moo-hyun administration and topped 300 trillion won in 2011 under the Lee Myung-bak government.

Concerns are high that the economic recovery might lose its momentum down the road due to slumping exports and lukewarm domestic demand, which are feared to drag down the country into a low growth cycle.

South Korea's gross domestic product grew 0.7 percent in the second quarter from three months earlier, staying below the 1 percent line for the second consecutive quarter. Exports, a key economic engine, plunged 10.2 percent in July from a year earlier, extending their losing streak to a record 19th consecutive month since January 2015. Consumer spending and retail sales recovered slightly but have not been enough to fully offset the slump in exports.

Against this backdrop, the finance ministry forecast that the South Korean economy will expand 2.8 percent on-year in 2016, down 0.3 percent from its earlier estimate of 3.1 percent and grow 3 percent in 2017.

Finance Minister Yoo Il-ho has been emphasizing the importance of the government's role in propping up the sluggish recovery by injecting more money into the real economy.

"The government drew up supplementary budgets to stimulate the economy last year and this year," Vice Finance Minister Song Eon-seog said in a prior briefing. "The 2017 budget is focused on creating jobs, regaining growth momentum and securing a new growth engine."

As a result, a large bulk of the spending was allocated to the health, welfare and labor sectors, for which about 130 trillion won will be set aside. In particular, 17.5 trillion won was earmarked for job creation projects, with 29.6 billion won for free influenza vaccinations for all children under 59 months old.

The requested budget for education and national defense was increased 6.1 percent and 4 percent to 56.4 trillion won and 40.3 trillion won, respectively. It included a plan to spend 39.9 billion won on installing air conditioning systems in all military barracks.

For the culture, sports and tourism areas, the government will spend 7.1 trillion won, up 6.9 percent, as part of its efforts to prepare for the upcoming 2018 PyeongChang Winter Olympics.

South Korea launched an "open platform" Tuesday to assist financial institutions in developing financial technology, called fintech, a government agency said, adding the system is the first of its kind in the world.

It is designed to offer standardized financial transaction programs involving all major banks and securities firms in the nation, according to the Financial Services Commission.

Application programming interface is used for that.

The platform would serve as a direct communication channel between fintech developers and financial services operators and also play a role as a test-bed for new services, the state financial regulator said.

"The establishment of such a joint open platform by financial circles is the world's first attempt," it said in a statement.

In an address at the opening ceremony at the Fintech Center in Bundang, just south of Seoul, the FSS's head Yim Jong-yong also described it as the "cornerstone" for South Korea to become a global leader in the fintech field.

Fintech companies, he stressed, will be able to develop stable and convenient services through the platform more easily and quickly.

"As the Seoul-Busan Expressway, which opened in the 1970s, served as the cornerstone of (South Korea's) dazzling economic development, the joint fintech open platform of the financial industry that opened today will be the cornerstone of South Korea's leap into a leading nation in global fintech," he said.

The system was developed after years-long efforts spearheaded by Korea Financial Telecommunications & Clearings Institute and Koscom Corp., a technology developer for brokerage houses.

A total of 16 banks and 25 securities firms here participated in the initiative in partnerships with fintech companies. (Yonhap)