SEOUL, Feb. 17 (Yonhap) — The head of the Organization for Economic Cooperation and Development (OECD) recommended Wednesday that South Korea provide targeted support to the sectors hit hard by the pandemic in light of growing pressure on public finances.
Angel Gurria, secretary-general of the OECD, said that providing selective support will help boost private consumption, compared with universal assistance to all families.
“It is important to ensure that public money is spent efficiently, all the more so as Korea is the world’s fastest ageing country, which implies considerable upward pressure on public spending going forward,” Gurria said in an email interview with local media.
His remarks came as South Korea is seeking to draw up an extra budget to provide another round of emergency relief handouts to small merchants and shop owners stung by the COVID-19 pandemic.
A controversy has heated up in South Korea over whether the country should offer targeted support or universal stimulus checks to cope with the economic fallout of the pandemic. The country’s finance minister has opposed providing across-the-board support amid mounting government debt.
Since last year, South Korea has provided three rounds of pandemic emergency handouts totaling 31.4 trillion won (US$28.4 billion), including the 14.3 trillion won stimulus checks doled out to all households in May.
Gurria said providing targeted support measures to the pandemic-hit sectors will have “greater multiplier effects, imparting a greater boost to private consumption,” compared with universal support to all families.
“The challenge, as always, is to agree on who exactly should be targeted and how much help is called for, but clearly some degree of targeting is warranted,” he said.
On deepening inequality caused by the pandemic, known as a “K-shaped recovery,” Gurria said the Korean government should adopt specific policies for under-represented and disadvantaged groups to prop up the labor market.
“These include measures such as facilitating women’s return to work after an absence from the labor market, continuing efforts to diversify vocational education options to attract more young people, and expanding training opportunities for low-skilled older workers,” he said.
In regard to ways to tackle falling tax revenue amid rapid aging, Gurria said it will be an “interesting” tax policy approach if Korea broadens the tax base, rather than raising statutory tax rates.
“Tax reforms that increase labor market participation, in particular for women, should be put high on the tax policy agenda, he said. “Strengthening the role of environmentally-related taxes to fight climate change will be another reform priority.”
The interview was conducted on the occasion of a conference to mark the 50th anniversary of the opening of the Korea Development Institute, a state-run think tank.