Bank of Korea Governor Lee Ju-yeol called for more fiscal role in stimulating the sagging economy, claiming next year’s spending plans insufficient while the central bank’s monetary policy is kept in a bind amidst tightening cycle in the United States and dangerous level of private-sector debt.

“When considering annualized nominal growth hovers around 4 percent, the increase of 0.5 percent in budgetary spending for next year is too low,” he told a year-end press conference on Wednesday, challenging the government’s claim of having created an accommodative fiscal outline for next year.

Budgetary spending for 2017 is earmarked at largest-ever 400.7 trillion won ($341 billion), up 3.7 percent from 2016 plan, but actually 0.5 percent larger when including the supplementary budget created in the second half.

In a parliamentary questioning on Thursday, Yoo Il-ho, deputy prime minister for economy and financial minister, said the government could propose to create a supplementary budget depending on the pace of growth in the first quarter.

“If there are signs that growth won’t reach even 2.5 percent, we may have to study (supplementary budget) after the first-quarter data is out,” he said.

During the same questioning, Lee predicted the economy to underperform earlier annual growth estimate of 2.8 percent next year.

Citing the limits of monetary means to stimulate the economy from the slow or little effect from zero or negative interest rates and quantitative easing program in other economies such as the European Union and Japan, Lee claimed fiscal maneuvering was a better solution to jump-start lethargic economy.

“Many institutions at home and abroad point to the leeway in fiscal policy and advice more aggressive role, and I agree,” he said.

Although there were still some ammunition left in monetary policy, “we would have be discreet because of domestic and external uncertainties,” he said to suggest the central bank won’t likely push the base rate further below the current record-low level of 1.25 percent even under worsening conditions.

By Boo Jang-won

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