South Korea Needs A 'Major Surgery' To Boost Economic Growth, Says President Park Guen Hye

In South Korean President Park Guen Hye's recent address to the country, she acknowledges the need for a "major surgery" as economic growth in the country slows down. South Korea, being Asia's fourth-largest economy, is behind its neighboring country China who has lower product costs and Japan who is known for its advanced technology.

Strait Times has noted on Monday that, despite China having a slow economic growth as well, this has not improved South Korea's economy. One reason being that it's very much dependent on the Chinese market, which is its largest importer.

Competition between the two countries in shipbuilding and steelmaking has also been rigid as China's yuan declines. In addition, tech firms in China, including Huawei Technologies, are becoming a threat to South Korean tech firms - wherein the former leads the market shares in the mobile phone industry.

In the same manner, the devaluation of the Japanese yen implies stronger competition with its technologies.

The slow economic growth of South Korea is also attributed to the declining workforce and a rapidly aging population due to low fertility rate.

In President Park Guen Hye's address last month, she has announced plans of tackling the issue of fertility and aging to boost education, employment and housing movements.

Bloomberg has also stated on Monday in their article that Park has set a 2016 budget of 386.7 trillion won for projects that will help boost economic growth

"The budget plan puts more emphasis on maintaining fiscal soundness than on supporting growth," says Lee Sang Jae, an economist for Eugene Investment and Securities Co. in Seoul. "The size of the budget proposed also may mean that monetary policy should be more active in supporting growth next year." 

Of the budget for 2016, biggest allocation with 122.9 trillion won will be granted to welfare programs, including a 15.8 trillion won budget to create jobs for the workforce. On the other hand, 60.9 trillion won - the second largest budget - will be allocated for general public services, with education coming next at 53.2 trillion won.

"Fiscal spending is playing a growing role in reviving economic momentum and so we proposed it to be expansionary," says Vice Finance Minister Bang Moon Kyu.