South Korea’s Incoming President Park Geun Hye Abandons Fiscal Austerity and Increases Welfare Spending

by Colonel on December 20, 2012

“South Korea may get a growth boost next year as incoming president Park Geun Hye abandons fiscal restraint and increases spending on welfare.

Park, who takes office in February, may plan as much as 20 trillion won ($18.6 billion) in additional spending, according to Nomura International Ltd. Extra government outlays will account for 0.8 percentage point of a likely 3 percent expansion in 2013, Standard Chartered Bank Korea estimates.

Outgoing President Lee Myung Bak’s fiscal record offers Park “significant leeway in policy,” according to Moody’s Investors Service, which raised South Korea’s sovereign rating this year, as did Fitch Ratings and Standard & Poor’s. One possible cost: missing the target that Lee set for further reducing the nation’s budget deficit next year to a six-year low of 0.3 percent of gross domestic product.

” —Eunkyung Seo and Cynthia Kim, Copyright 2012 Bloomberg LP

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