[SEOUL] South Korea will focus on creating more jobs and increase spending modestly next year, while seeking out new sources of economic growth, the finance ministry said on Tuesday as it unveiled its draft 2017 budget.
Budgeted spending will increase 3.7 per cent to 400.7 trillion won (S$482.9 billion) next year, picking up from 2.9 per cent growth set for this year but slower than the 5.5 per cent rise set for 2015, the finance ministry said.
Spending for health, welfare and labour will account for the biggest slice of the pie at 130.0 trillion won, up 5.3 per cent from this year.
Some 17.5 trillion won of that will be used solely for job creation, although the government did not give a specific target number for new jobs.
"We aim to respond to downside risks from outside and inside the country and stoke activity in the slumping private sector,"said Park Chun-sup, a budget official at the finance ministry, told a news briefing.
Job growth is top priority, Mr Park said.
Government projects that have proved ineffective in creating jobs will be scrapped or downsized, while industries that young Koreans prefer working in, such as gaming and technology, will receive more government investment next year.
The budget assumed the economy will grow by a real 3.0 per cent next year, versus a projected 2.8 per cent expansion for this year and last year's actual 2.6 per cent growth.
Asia's fourth-largest economy grew at an unexpectedly robust 3.2 per cent annual rate in the second quarter, driven by firmer domestic consumption and capital investment, but analysts said the lift would probably be temporary.
Exports remain weak amid sluggish global demand and an ongoing overhaul of the country's shipping and shipbuilding industries may see tens of thousands of jobs lost.
In its medium-term fiscal management plans for 2016 to 2020, the ministry said government spending would grow by an average 3.5 per cent each year.
South Korea is expected to have a fiscal deficit of 1.7 per cent of annual gross domestic product (GDP) next year, improving from 2.3 per cent expected this year. The government plans on reducing that to 1.0 per cent by 2020.
Sovereign debt will stand at 40.4 per cent of GDP next year, compared with 40.1 per cent set for this year.
On a medium-term basis, the government aims to keep this number as close to 40 per cent as possible to maintain a healthy balance sheet.
"This year we took fiscal prudence a bit more into consideration than last year, as last year government money was spent aggressively on many economic hardships including a sizable extra budget," said Song Eon-seok, a vice finance minister.
Once parliament passes this year's extra budget, South Korea's fiscal deficit and sovereign debt-to-GDP will stand at 2.4 per cent and 39.3 per cent this year, respectively.
The government plans to submit next year's budget bill to parliament for approval by Sept. 2. South Korea's fiscal year starts on Jan 1.
Separately, finance ministry officials told Reuters the government plans to sell up to a net 37.7 trillion worth of treasury bonds in 2017, compared with 45.9 trillion won worth planned for 2016.
The government also raised the limit for possible foreign currency-denominated foreign exchange stabilisation bonds to US$1 billion next year, up from US$500 million for this year.