Global Financial Crisis and Fiscal Policy Direction of Korea

고영선(KDI)

Impact of the global crisis on the Korean economy

• Big decline in the 4thquarter last year, but stabilizing recently
  
  The impact came mostly through the external trade, and little through the financial sector.

Fiscal Impulse

• Very large fiscal impulses in 2008 and 2009
  
  Reflects the discretionary fiscal actions by the government to boost the economy

Tax cuts

• Tax cuts in 2008 as promised during the election campaign
  
  The revenue loss will amount to 89 trillion won for 2008-2012, and 24 trillion won each year for 2013 and beyond.

Medium-term projections

• Official projections not available
  
  Possibility of falling into an adverse debt dynamics