Seoul : South Korea Monday announced a 14-trillion-won ($11-billion) stimulus package as it faces its worst economic turmoil since it needed an International Monetary Fund (IMF) bailout a decade ago.
Public spending is to rise next year by 11 trillion won and the package’s remaining three trillion won would go to tax benefits, the finance ministry said.
Finance Minister Kang Man Soo estimated South Korea’s economy would grow only three percent next year because of the global financial crisis but also warned of a further slowdown.
“It will be difficult to achieve the growth if global economic conditions further worsen,” he said.
Last month, Kang had forecast a growth rate of below 4 percent for next year for Asia’s fourth-largest economy. For this year, the government further downgraded its economic forecast in July from 5 percent to 4.5 percent growth. Earlier, it had expected 6 percent.
The stimulus package announced Monday would provide more than 4 trillion won for infrastructure projects, such as roads, schools, universities and hospitals. Small and medium-sized businesses as well as farmers, fishermen and low-income families are also to receive help.
The government announced another stimulus package of 5 trillion won two weeks ago, which is aimed at supporting the construction industry, including buying land. The National Assembly also approved a $130-billion package at the end of October aimed at stabilizing the country’s financial sector through credit guarantees and the infusion of fresh capital to boost liquidity in the banking and export sector.
Governments the world over have announced economic stimulus packages as credit has dried up and stock markets have plunged in the wake of the subprime mortgage crisis in the United States.
Investors have pulled out of emerging markets, dragging down South Korea’s stock market and currency. Job losses have followed, and homes have gone unsold.
In reaction, the central bank made a record interest-rate cut last week, and the US Federal Reserve agreed to a currency swap worth $30 billion with the Bank of Korea.