Consumption stimulus package draws flak

The government said Thursday it will release a 3 trillion won ($2.6 billion) stimulus package to revive weak consumption, and provide tax benefits and financial aid to low-income earners and small businesses.

However, analysts called the measures “ineffective” and “out of tune with the harshness of reality.”

The government will expand flexible working hours, designating one day every month as a day when families can enjoy outings. It will also direct employers to allow workers to get off work two hours early on Fridays. Workers will get special discounts of up to 50 percent on early train ticket reservations.

Other benefits include offering a 40 percent tax credit — up from 30 percent — on public transportation and shopping at traditional markets.

Low-income earners will also receive increased tax rebates of 200,000 won up from 100,000 won on fuel spending for small cars.

All these steps were announced following a ministerial meeting presided over by acting President and Prime Minister Hwang Kyo-ahn.

The government will make low-interest loans totaling 80 billion won available to small businesses and restaurants hit by the latest anti-graft law, or the so-called Kim Young-ran Act, which bans public servants, teachers and journalists from receiving meals and gifts exceeding regulatory limits ranging from 30,000 won to 100,000 won.

The latest in a series of stimulus packages comes as private consumption, which accounts for 45 percent of economic output, remains weak.

Prof. Yun Chang-hyun, an economist at the University of Seoul, said the government seems to be moving backwards with less economic sense in trying to revive the economy.

“A policy is better than no policy, but this looks like it has been made out of desperation without truly understanding what the real problem is. It will be ineffective,” Yun said.

“How can you boost consumption when more young people — our major consumers — are becoming jobless? And when we have this law restricting consumption? We need to first try to come up with solutions to boost job creation, and correct the anti-graft law.”

Independent economist Chu Jin-hyung also said that the policy does not look realistically feasible.

“It has been making one policy blunder after another. It shows that it does not want to tackle the real fundamental problem at hand with regards to joblessness and rising costs,” Chu said.

Analysts say Koreans have been increasing their net savings especially since 2012 amid the growing social pressures of an aging population and early retirement.