The government has submitted a supplementary budget worth 3.9 trillion won ($3.7 billion) in an emergency gesture to alleviate the nation’s unemployment crisis and revitalize regional economies in distress, according to the Ministry of Strategy and Finance on Thursday.

Responding to opposition parties, which have criticized the extra spending plan as a tax-imposing populist move, the ministry says the costs may be covered without additional taxation, citing surplus tax revenue for this year and surplus accounts from last year.

“Despite the recent recovery trend of the economy, youth unemployment has reached a record level of 9.8 percent,” Deputy Prime Minister and Finance Minister Kim Dong-yeon said in a press briefing Tuesday.

“The actual rate is estimated to be much higher, with practically 1 out of 4 of the young generation without a job.”
 

Under current circumstances, some 140,000 more people are likely to join the unemployed cluster by 2021, aggravating the current situation to the level of a national unemployment crisis, according to the top policymaker.

The minister also expressed concerns over massive restructuring-hit regions such as Gunsan in North Jeolla Province and Geoje and Changwon, South Gyeongsang Province, as well as three other cities where the unemployment rate has been skyrocketing in recent months.

Bearing the biggest blow has been Gunsan, where US auto giant General Motors is seeking to close down underutilized local plants and to reduce workforce in the face of sluggish sales, which sent regional unemployment from 1 percent to 2.5 percent. The southwestern city was already suffering setbacks last year in the wake of a shipyard shutdown by Hyundai Heavy Industries.

“We shall address these urgent issues through a 3.9 trillion won extra budget, allocating 2.9 trillion won to job creation and 1 trillion won to regional economic measures,” the minister said.

“The extra fund of 2.9 trillion won is almost equal to the 3 trillion won that was originally set as this year’s job creation fund,” Kim explained, underlining the government’s determination to prioritize employment.

“The 1 trillion won allocated to regional economies should also be sufficient to revitalize the corresponding economies, given that the amount is to be spent on designated areas only.”

In addition to the extra budget injection, Gunsan may also be designated as a special industrial crisis zone and receive further tax incentives, Kim added at an economy-related ministers meeting Thursday.

Citing surplus tax revenue from last year and this year, the minister stressed that the extra budget plan would place no additional burden on the nation’s fiscal capacities.

“We will be using the 2.6 trillion won account surplus from last year and 1.3 trillion won surplus from pension funds,” Kim said.

“There will be no additional issuance of government bonds or another tax hike either.”

The ministry’s goal is to bring the nation’s youth unemployment rate down to 8 percent or below by 2021, according to officials.

By Bae Hyun-jung (tellme@heraldcorp.com)