À̹ÌÁö È®´ë The Organization for Economic Cooperation and Development (OECD) advised South Korean authorities to gradually shift away from loose monetary policy and raise value-added tax to bolster ammunitions for social welfare spending against risks from the country`s rapidly aging population.
In its biennial economy survey report on Korea published on Wednesday, the group representing developed economies kept the gross domestic product (GDP) growth outlook for Korea at 3.0 percent for this year and the next, unchanged from its last global report in May.
It raised concerns over the vulnerability in the export-reliant economy, whose growth largely hinges on construction boom at home and overseas demand of semiconductors, as well as the country¡¯s alarmingly high household debt.
It advised gradual tapering in accommodative monetary policy and stronger lending regulations to contain household debt that hovers at 180 percent against disposable income, considerably higher than the OECD average. The Bank of Korea has kept its policy rate unchanged at 1.50 percent since November after the first increase in more than six years.
The organization was also critical of the pro-labor and anti-business policies of the progressive government under President Moon Jae-in.
It advised discretion against a further hike in the minimum wage that was raised by 16.4 percent against last year under the goal of pushing up the hourly wage base to 10,000 won ($9) within three years, saying that the move can worsen job conditions and overall business sentiment.
¡°Unless this is matched by higher productivity, it could push inflation above its target and have a negative impact on Korea¡¯s international competitiveness,¡± the report said.
It also said the hike in corporate income tax runs counter to the trends in other developed countries that have been shaving corporate taxes to encourage hiring and investment, and recommended raising indirect taxes like the VAT as a more efficient option to bolster the tax revenue base
The group said the country needs to beef up public finance to increase spending in social welfare in light of the rapidly aging population.
The country¡¯s spending on pensions and health and long-term care would have to increase to 26 percent against its GDP from the current 10 percent to sustain the bulk of seniors against the thinning working population.
By Lee Yu-sup and Kim Hyo-jin
[¨Ï Pulse by Maeil Business Newspaper & mk.co.kr, All rights reserved]