South Korea will review its policy of providing free child care for children under two years old because of the fiscal burden on local governments.
“The finance ministry will talk to local governments and experts, and I promise we will come up with a solution to ease the burden on municipalities while still benefiting everyone,” Finance minister Bahk Jae Wan told reporters today in Seoul. “The free child care system needs to be financially sustainable.”
The system, introduced this year, expanded a previous programme offered to low-income mothers, and has helped drive down consumer prices. Bank of Korea Governor Kim Choong Soo said June 8 subsidies for child care and school lunches had helped bring down inflation, which moderated to 2.2 percent last month from a year earlier.
Separately, Bahk said the sluggish housing market and household debt are short-term risks to economic growth. North Korea and the country’s aging population are long-term threats, he said.
“It is clear the kind of strong recovery we expected earlier is being delayed,” Bahk said. “But I understand that many think tanks hold the view that the second half will see stronger growth than the first.”
South Korea’s gross domestic product may expand 3.3 percent this year, less than a December estimate of 3.7 percent, the finance ministry said last week. The cut to the growth forecast followed the central bank paring its estimate to 3.5 percent from 3.7 percent. -By Cynthia Kim and Eunkyung Seo