SEOUL — The South Korean government proposed a 17.3 trillion won stimulus Tuesday to revive slowing growth in the country.
The $15.3 billion effort would be the third-largest supplementary budget ever in South Korea. It would be exceeded, when measured as a proportion of gross domestic product, only by the efforts approved after the 1998 Asia financial crisis and the 2008 global financial turmoil.
The Ministry of Strategy and Finance said the budget would add 0.3 percentage point to growth this year and create 40,000 new jobs.
A ministry statement said the budget would be used to cover a shortfall in tax revenue, to aid small and medium-size companies and to lift the stagnant real estate market. It said it would submit the plan to Parliament on Thursday.
The ministry estimated a tax revenue shortfall of 6 trillion won because of the slower-than-expected economic recovery and another shortfall of 6 trillion won from delays in selling stakes in state-owned banks. The remaining 5.3 trillion won would be a net increase in the government’s budget.
In addition to the extra budget, which requires parliamentary approval, the ministry will use 2 trillion won in state funds that do not need to go through the assembly to stimulate the economy.
“The extra budget is aimed at finding growth momentum for South Korea’s economy,” the finance minister, Hyun Oh-seok, said in a news release.
The stimulus plan comes after a cut last month in the ministry’s forecast for South Korea’s economic growth this year. It said South Korea’s economy would expand 2.3 percent, instead of the 3 percent it had predicted earlier. The ministry said the slide in Japan’s yen had hurt exports and weakened weak consumer sentiment.
The Bank of Japan’s unprecedented monetary measures, which have driven down the yen’s value, are meant to help lift Japan’s economy out of years of deflation. But the weaker yen puts major South Korean exporters like Samsung Electronics and Hyundai Motor at a disadvantage against Japanese rivals like Sony and Toyota Motor.
The fiscal measures also come amid heightened tensions with North Korea. The increase in threats from the North has caused jitters in South Korea’s financial markets.
The stimulus plan underlines the government’s search for a quick fix to the economic slowdown. South Korea’s economy expanded 2 percent in 2012, the slowest rate in three years, because of weak global recovery and trade. The opposition, however, could use procedural tactics to slow parliamentary approval of the extra budget.
Despite the government’s calls for all-out efforts to help the economy, South Korea’s central bank has resisted lowering interest rates.
Last week, Bank of Korea kept its main interest rate unchanged at 2.75 percent for a sixth month. Governor Kim Choong-soo said the economy was on track for a slow recovery and monetary policy was “accommodative” enough to encourage borrowing and spending.
Article source: http://www.nytimes.com/2013/04/17/business/global/south-korea-proposes-15-3-billion-stimulus-budget.html?partner=rss&emc=rss