Stabilizing Living Costs for Ordinary People, Economic Policy Focused on Private Sector-Led Investment and Job Creation
"Supplementary Budget Will Seek Ways to Minimize Price Instability... Real Estate Measures Include Supply Expansion, Easing Property and Capital Gains Taxes"
Legislation for Fiscal Rules Also Underway
Chu Kyung-ho, a member of the People Power Party who was nominated as the first Minister of Economy and Finance and Deputy Prime Minister for Economic Affairs under the Yoon Suk-yeol administration, is entering the office at the Presidential Transition Committee set up at the Financial Supervisory Service Training Institute in Tongui-dong, Jongno-gu, Seoul on the 10th. Photo by Transition Committee Press Corps
[Asia Economy Sejong=Reporter Kwon Haeyoung] Chu Kyung-ho, the newly appointed Deputy Prime Minister for Economy and Minister of Strategy and Finance, chosen as the first economic chief of the Yoon Seok-yeol administration, announced that he will prioritize 'stabilizing living costs for ordinary citizens' and 'investment led by private companies and creation of quality jobs' as the top economic policy goals. A shift in economic policy direction is expected in the new government, moving away from the current administration’s public sector-centered, income-led growth toward market-based, private-led growth.
Shift in Policy Direction from 'Government and Fiscal-led Growth to Private-led Growth'... Price Stability Also a Top Priority
At a press conference held on the 10th at the Bankers Hall in Jung-gu, Seoul, Deputy Prime Minister-designate Chu Kyung-ho said, "Currently, economic measures have mainly been government and fiscal-led, but the core of revitalizing our economy and strengthening its structure remains the private sector, companies, and the market," adding, "We will help companies shed their burdens."
He emphasized, "We need to address structural issues that restore economic vitality and strengthen our economic structure to increase growth potential," and added, "There are many laws and regulations that restrict various corporate activities in the global competitive environment, shackling companies’ feet, and we will make efforts to remove these shackles as quickly as possible."
He clearly stated that stabilizing domestic consumer prices, which surpassed a 4% increase rate for the first time in about 10 years last month, and supporting small business owners affected by COVID-19 are also top priorities. Deputy Prime Minister-designate Chu said, "Stabilizing living costs for ordinary citizens is an urgent task and the first step toward stabilizing people’s livelihoods," and emphasized, "As I mentioned in the supplementary budget (Chugyeong) policy, it is extremely urgent and important to alleviate the difficulties of small business owners and self-employed people who have been hardest hit by COVID-19 and to provide full compensation for their losses."
Supplementary Budget to Be Pursued Within Range Minimizing Price Instability... Cost Reduction Through Public Sector Efficiency Expected
Regarding concerns that the supplementary budget of 30 to 50 trillion won to be implemented after the new government’s launch could stimulate prices, he said, "Within the range that does not undermine macroeconomic stability efforts, whether it is loss compensation for small business owners and self-employed people or livelihood stabilization measures, we will find ways to minimize the impact on price instability and try to create a policy combination," adding, "The specific scale and content will be introduced at the government’s launch and the supplementary budget bill will be submitted to the National Assembly." He expects the scale of expenditure restructuring to secure supplementary budget funds to be outlined by the end of this month or early next month.
As a measure against high prices, he hinted at pursuing tax system reforms, supply-demand stabilization, and distribution structure improvements, along with cost reduction and suppression of fee increases through public sector efficiency. He said, "It is no longer an era where the government can directly manage and control prices, and policy tools are very limited," adding, "The government should focus on tax systems, various supply-demand stabilization efforts, and distribution structure improvements."
He explained, "Since the government can directly decide and exert influence on fees and prices related to the public sector, we will review the fee structure and contribute to stabilizing living costs for ordinary citizens when necessary." Deputy Prime Minister-designate Chu criticized, "When public sector prices are decided, the cost structure is supposed to be based on actual costs, but have they really made efforts to stabilize public fees? They should not irresponsibly approach it by operating wastefully, accumulating other price increase factors, and then deciding to raise fees when the time comes." This can be interpreted as his intention to pursue maximum public sector efficiency to reduce costs and only raise fees if there are no appropriate alternatives.
Deputy Prime Minister-designate Chu also expressed his intention to strengthen communication with the Governor of the Bank of Korea, who oversees monetary policy, as the head leading economic policy, saying, "There are intertwined macroeconomic challenges such as household debt, national debt, and rising U.S. Treasury yields, so dialogue between the central bank and the Ministry of Strategy and Finance must be frequent."
Promoting Real Estate Supply Expansion Based on 'Market Logic' and Normalizing Punitive Taxation... Emphasis on Legalizing Fiscal Rules
Furthermore, to normalize the failed real estate policies of the Moon administration, he hinted at expanding supply based on market logic and easing punitive property holding and capital gains taxes. Deputy Prime Minister-designate Chu said, "Absolute supply expansion is necessary, and supply should especially increase where there is market demand," adding, "Excessive property holding and capital gains taxes need to be normalized, and certain regulations on redevelopment and reconstruction should be eased." He continued, "I believe the current administration’s direction of excessively using real estate taxation to burden the public and trying to control housing prices through taxation is wrong," and added, "In the process of reversing wrong policies, if we proceed too rapidly, it could cause other side effects, so we need to be cautious but move in a direction that respects market logic."
He also cited strengthening fiscal soundness and legalizing 'fiscal rules,' which he has emphasized several times in the National Assembly, as major tasks. National debt rapidly increased during the Moon Jae-in administration, surpassing 2,000 trillion won for the first time last year.
Deputy Prime Minister-designate Chu said, "In the past, the executive branch operated fiscal management using very strict internal fiscal rules, but now the policy environment is continuously changing to a situation where politics overwhelms the economy," adding, "It is possible for the National Assembly and government to jointly regulate fiscal management, and this can be achieved by legalizing fiscal rules." He emphasized, "I think fiscal management that focuses on concentrated spending to drive growth in the government sector through jobs and investment indicators should be avoided."
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