On the 22nd, Minister nominee Park Hong-geun for the Ministry of Planning and Budget said regarding the compilation of a supplementary budget to respond to the Middle East crisis, "It is not desirable for a supplementary budget to be used as a routine fiscal management tool."
Park gave this answer in a written response for his confirmation hearing submitted to the National Assembly's Strategy and Finance Planning Committee, to a question from People Power Party lawmaker Kwon Young-se asking about "institutional mechanisms to prevent a supplementary budget from being used as a routine fiscal management tool."
However, Park agreed on the need to compile a supplementary budget. Park said, "As the situation in the Middle East drags on, export companies and related industries in the region are being directly hit, and the difficulties of small business owners and farmers and fishers are also worsening," adding, "There is a need for early action through the fiscal authority's preemptive role so that the economy, which had shown signs of recovery, does not spread into a crisis."
He said this supplementary budget should include funding for ▲ easing logistics and fuel cost burdens to respond to high oil prices ▲ stabilizing livelihoods for low-income people, small business owners, and farmers and fishers ▲ supporting export companies. In particular, he said, "Given the rapidly changing situation in the Middle East, it is reasonable to focus support on vulnerable groups that are directly hit."
Asked whether the government is considering issuing consumption coupons for livelihood recovery, he said, "As inflation and an economic slowdown due to the escalating Middle East crisis could increase the burden on household finances, it is necessary to review a range of measures to support livelihoods."
On the size of the supplementary budget, he answered, "To minimize the impact on the Government Bonds and foreign exchange markets, we should set an appropriate size within the scope of using excess tax revenues without additional government bonds issuance."
On the impact a supplementary budget could have on prices, he explained, "Spending increases through a supplementary budget typically trigger a rise in aggregate demand and can affect inflation," adding, "However, depending on economic conditions, the nature of the expenditure, and government policy, the inflationary impact of expansionary fiscal policy and a supplementary budget can vary."
At the same time, he assessed, "Given that the current growth rate is below potential gross domestic product (GDP) and that there is imbalanced growth between the information technology (IT) sector such as semiconductors and the non-IT sector, the price impact is limited."