Lee Jae-myung "Introducing Fiscal Rules? Frustrating... Could Lead to More Severe Economic Contraction"

"Even if it means going into debt, proactive fiscal expansion policy must be implemented"

Gyeonggi Province Governor Lee Jae-myung is responding to a lawmaker's question during the National Assembly Land, Infrastructure and Transport Committee's audit of Gyeonggi Province held on the 20th at the Gyeonggi Provincial Government Office in Paldal-gu, Suwon-si, Gyeonggi-do.

[Asia Economy Reporter Kim Ga-yeon] Lee Jae-myung, Governor of Gyeonggi Province, expressed his strong agreement with Yang Kyung-sook, a member of the Democratic Party of Korea, who argued that "we must implement proactive fiscal expansion policies even if it means going into debt now."

On the 26th, Lee posted on his Facebook, saying, "Our economy is currently in a crisis that could freeze immediately unless we open the circulation by reducing household burdens and increasing spending. However, the perceptions of the Ministry of Economy and Finance and the head of the central bank are solely focused on managing national debt."

Lee said, "It is truly frustrating," adding, "Recently, Governor Lee Ju-yeol of the Bank of Korea emphasized strict fiscal rules citing Korea's low birthrate and aging population. Following that, Deputy Prime Minister and Minister of Economy and Finance Hong Nam-ki gave a YouTube lecture stating the need to introduce Korean-style fiscal rules considering the rapid increase in national debt."

He continued, "Not long ago, IMF Managing Director Kristalina Georgieva also described this as the most severe recession since the Great Depression and emphasized government fiscal spending to avoid damage," and stressed, "Major central bank heads worldwide, including Federal Reserve Chair Jerome Powell and European Central Bank President Christine Lagarde, are also urging governments to increase fiscal spending."

He then expressed concern, saying, "The introduction of fiscal rules is not a global trend and should be implemented differentially depending on conditions. Otherwise, it could lead to more severe economic contraction such as deflation, reduced consumption, followed by slowed job growth and increased unemployment."

Finally, he emphasized, "If government bonds are the problem, the financial authorities should first properly secure the unrecovered public funds from the IMF."

Meanwhile, Deputy Prime Minister Hong argued on the 22nd during the National Assembly's Planning and Finance Committee comprehensive audit that if fiscal rules are not legislated, it could affect the country's credit rating.

Deputy Prime Minister Hong also uploaded a video titled "Mastering Korean-style Fiscal Rules" on the Ministry of Economy and Finance's official YouTube channel, emphasizing the necessity of fiscal rules.