South Korea has pledged to spend 160 trillion won ($133.3 billion) in a five-year New Deal initiative to digitalize social infrastructure and accelerate the green energy transition, its most ambitious effort yet to revive the virus-stricken economy.
In a televised speech at the presidential Blue House on Tuesday, President Moon Jae-in said the New Deal plan represents “a huge leap forward for South Korea.”
“This shows the government’s strong commitment to fundamentally changing Korea, from an economic laggard to a leading economy, from a carbon-dependent economy to a low-carbon economy, and from an unequal society to an inclusive society,” Moon said.
Government spending for the five-year project would be hiked up to 114.1 trillion won from the 76 trillion won announced last month, Moon said. An additional 46 trillion won would be drawn from local governments and the private sector to inject a total of 160 trillion won through 2025.
By the end of Moon’s five-year term in 2022, spending is expected to reach 67.7 trillion won, with 49 trillion won to come from the national government.
Moon projected the program to create about 1.9 million new jobs over the next five years.
The Korean New Deal is centered on two pillars – digital and environmental – with an added emphasis on bolstering the social safety net.
The government has earmarked 44.8 trillion won for the digital New Deal. This includes investment in 5G and artificial intelligence, remote medical care and digitalization of social infrastructure systems.
Spending for the green New Deal is set at 42.7 trillion won. This involves installing energy-efficient smart grids, expanding renewable energy sources and encouraging the spread of clean vehicles.
The remaining 26.6 trillion won would be spent on enhancing job and social security. The government plans to invest directly in job creation and job retraining as well as expand unemployment insurance benefits to vulnerable contract workers.
The massive economic initiative comes as the Moon administration grapples with the economic fallout from the pandemic and plummeting approval ratings.
The Korean economy shrank 1.3 percent in the first quarter in its sharpest contraction since 2008. The International Monetary Fund recently revised down its growth forecast for Korea, expecting the economy to decline 2.1 percent this year.
Moon’s popularity ratings had surged to 71 percent in May, thanks in large part to the country’s successful handling of the initial outbreak. But they dropped to 47 percent in a Gallup poll released last Friday, on growing public discontent over sky-high housing prices despite multiple tax hikes and regulations.
By Lee Ji-yong, Lim Sung-hyun and Kim Hyo-jin
[ⓒ Pulse by Maeil Business News Korea & mk.co.kr, All rights reserved]