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| Deputy Prime Minister and Finance Minister Hong Nam-ki speaks during a press briefing at the Seoul Government Complex, Monday. Yonhap |
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By Lee Kyung-min
The government will continue to maintain its expansionary fiscal policy next year, to provide the impetus for an economic recovery in the first half by frontloading 63 percent of the massive 608 trillion won ($509.8 billion) annual budget, the finance ministry said Monday.
The decision comes as part of the 2022 Policy Directives unveiled by the Ministry of Economy and Finance, aimed at spurring growth momentum and revitalizing Asia's fourth-largest economy, which has been underpinned by exports.
Under the plan, the government will place a priority on supporting the recovery of domestic demand, by expanding tax incentives on credit card use and extending discount coupon schemes. Another focus will be placed on ensuring green and innovative growth by spending up to 33.1 trillion won in related industries, including businesses that advance green and carbon neutrality drives.
"We announced three major support measures for small business owners last week," Deputy Prime Minister and Finance Minister Hong Nam-ki said during a press briefing at the Seoul Government Complex, Monday. "The fiscal year has not started yet, and prompt execution is top priority."
Logistics issues experienced by export firms will be addressed promptly and resolved via frequent and results-oriented discussions through a variety of channels participated in by stakeholders, an open and productive process to reduce the fallout from continued global supply chain disruptions.
Risk management will also be enhanced overall through more stringent monitoring of household debt and firms with shaky financials, while emergency measures will be devised and strengthened to protect small- and medium-sized enterprises from bankruptcy and to curb inflation.
"Korea's recovery from the pandemic next year will be the fastest among major developed countries," First Vice Minister of Strategy and Finance Lee Eog-weon said in a press briefing at Sejong Government Complex, Dec. 17.
"Concerns linger over domestic and external uncertainties as well as the people's livelihoods, especially low-income vulnerable groups. Soaring living costs and income polarization are among the gravest concerns."
The finance ministry forecast the country will grow 3.1 percent in 2022 after an expansion of 4 percent this year. It expects that consumer inflation will reach 2.2 percent next year after peaking at 2.4 percent in 2021.
Up to 50 percent in tax credit will be granted to businesses making greater investments in developing what the government categorizes as "strategic" technologies. The ceiling will be 40 percent for those investing in net-zero carbon emission-related technologies.
In February next year, the government will designate 65 technologies, the developers of which will be granted expanded benefits for investments in research and development as well as facilities. Technology developers of semiconductors, batteries and vaccines will be eligible.
The government will spend 115 trillion won for executing state-run projects and bolstering private investment next year, up from 110 trillion won this year. A total of 261 trillion won in financing will be made available for export firms, mostly mid-sized businesses, up by 5 trillion from this year.
Expanding global trade networks
The government will make continued efforts to expand the global free trade network, to help local businesses gain a greater foothold and presence overseas ahead of the Regional Comprehensive Economic Partnership (RCEP) set to take effect in February next year. Also increasing the need for greater global standing is the country seeking to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP).
A low-interest fund of 35.8 trillion won will be provided to struggling small businesses, and their payments for taxes, rent and utility bills will be delayed for another three months.
Domestic and external risk management will be strengthened, as monitored by a taskforce set up to operate an early warning system for more than 4,000 key export and import items.
Two hundred items will be designated as key strategic items, for which local manufacturing and stockpiling will be expanded. Global cooperation will be pursued with suppliers of products for diversified supply channels.
Household debt and financially unviable companies will be monitored closely. The government will limit the annual growth of household debt to up to 5 percent, as managed by the debt service ratio (DSR), which is tighter compared with previous lending rules based on debt-to-income (DTI) and loan-to-value (LTV) ratios.
