Korea Parliament Deadlock Break Clears Way for Budget
(Corrects seventh paragraph of story originally published on Dec. 4 to show government growth estimate was 2.7 percent.)
The two parties agreed to approve a 2014 budget bill that had been held up since October by a year-end deadline and review economy-related bills as swiftly as possible, the main opposition Democratic Party said in a statement yesterday. Opposition politicians had boycotted parliament meetings since Nov. 29 to protest the ruling party’s unilateral confirmation of President Park Geun Hye’s nominee for the top state auditor.
About 100 bills proposed to spur the economy have been sitting in parliament, threatening to derail the economy’s growth momentum and hurting the nation’s credibility, Finance Minister Hyun Oh Seok warned at a ministerial meeting yesterday.
“This is a big relief as many stimulus policies including housing market need parliament’s support,” said Lee Sang Jae, chief economist at Hyundai Securities Co. in Seoul. “The budget and other bills will help a lot in reviving domestic demand.”
Pending legislation includes bills aimed at attracting foreign investment, boosting tourism and service industries, and supporting a sluggish property market. Tax revision bills need to be passed by the end of the year as some state support for low-income earners and smaller companies is set to expire, Hyun said yesterday.
The won was little changed at 1,060.85 per dollar as of 1:13 p.m. in Seoul. The benchmark Kospi Index fell 0.7 percent.
The economy will grow 3.9 percent next year - the fastest pace since 2010 - after a 2.7 percent expansion in 2013, the finance ministry projected in September. The government scaled back President Park’s election pledges to pensioners in the 2014 draft budget and delayed plans to eliminate the deficit as the government forecast the first drop in revenue in four years. Next year’s fiscal spending plan was at 357.7 trillion won, up 4.6 percent from this year except for extra budget.
With inflation near a 14-year-low providing room for the central bank to support economic growth, the Bank of Korea has kept the benchmark interest rate at 2.5 percent after a surprise cut in May. The monetary policy board next meets on Dec. 12.
“It’s a breakthrough,” Raymond Yeung, a Hong Kong-based senior economist at Australia & New Zealand Banking Group Ltd., said. “It means that Korea will rely less on using monetary policy to boost growth.”
“The BOK can keep rate at the current level for an extended period.”
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