The South Korean government will expedite 400.7 trillion won ($340 billion) 2017 fiscal spending in the first half to kick-start the economy to prevent a recession in the face of growing risks on the economic front including faster tightening in the United States and could create a supplementary budget in the second half should the economy fails to pick up, said deputy prime minister for economy Yoo Il-ho.

“As long as I am the deputy prime minister, I would command the center (of economic policy),” Yoo told a news conference on Wednesday. It was his public appearance after he was sacked to be replaced by financial chief Yim Jong-yong in a cabinet reshuffle President Park Geun-hye made after her first apology on the influence-peddling scandal involving her friend Choi Soon-sil. The awkward role-sharing with Yim ended after Prime Minister Hwang Kyo-ahn who has become the acting president after Park was impeached by the legislative retained Yoo with the approval of the opposition parties. Yoo would be in charge of economic affairs at least for another half a year until Park’s presidency formerly ends with a Constitutional Court ruling and a new administration is formed under a newly elected president.

State management is already under joint custodianship with the legislative, he said, adding the government will also closely consult economic policy affairs with the opposition-majority National Assembly.

He pledged a preemptive budgetary spending in the first quarter next year and increase investments in public institutions to prop up the nation’s economy struggling under sluggish exports and domestic consumption. He vowed to fix some adverse side effects of the recently launched anti-corruption law that has further dampened the job market and private consumption.

“If conditions become adverse, it (supplementary budget) may be necessary,” he said responding to the recommendation from state think-tank Korea Development Institute (KDI) upon downgrading next year’s growth outlook to 2.4 percent.

The 2017 economic policy outline the government announces later in the month would focus on ways to bolster income for the working class and stimulate private consumption.

Markets more or less stayed cool to Yoo’s comments as they were more engrossed with the tightening pace of the U.S. Federal Reserve. As expected, the U.S. central bank raised short-term interest rates for the second time in a decade in Wednesday’s meeting, pushing up the fed fund rate range to 0.5-0.75 percent. It indicated three quarter-point additional hikes in 2017 as job and inflation data near the Fed`s long-term goals and aggressive fiscal expansion backed by tax cuts and infrastructure spending by the incoming Donald Trump administration could fuel the recovery.

On Thursday, the Bank of Korea kept the benchmark interest rate unchanged at 1.25 percent and said it would run monetary policy to stabilize the financial market while keeping close watch on the repercussions from the U.S. interest rate movements, economic conditions, and household debt.

At 1:15 p.m. the Korean Composite Stock Price Index was down 0.27 point at 2,036.60. The secondary Kosdaq added 5.72 points to 618.22. The U.S. dollar rose 11.00 won to 1,179.00 won. The three-year government bond yield gained 6.1 basis points to 1.705, tracking the jump in two-year Treasury note to a seven-year high.

By Cho Si-young and Kim Se-woong

[ⓒ Pulse by Maeil Business News Korea & mk.co.kr, All rights reserved]