SEJONG, South Korea, Mar 28: South Korea’s new government sharply cut this year’s economic growth forecast on Thursday and pledged various stimulus measures including an extra budget over the coming weeks to pull the economy out of a slump.
The previous government had predicted Asia’s fourth-largest economy would start to pick up momentum from late 2012 but a delayed recovery in global demand and weak spending by heavily-leveraged South Koreans have delayed a recovery.
The government of President Park Geun-hye, sworn in a month ago, now sees the export-reliant economy growing by just 2.3 percent instead of 3 percent seen by the previous government, the Ministry of Strategy and Finance said in a statement.
‘The government has decided to act in a more pre-emptive manner in response to heightened macroeconomic uncertainties,’ Choi Sang-mok, director-general at the ministry, told reporters in the administrative capital of Sejong.
The central bank has already cut its own growth forecast for this year to 2.8 percent in January from 3.2 percent projected in October, and that view may be revised again when its policy board next meets on April 11.
The finance ministry said it would unveil a series of stimulus measures over coming weeks covering such areas as employment, living standards, the depressed property market and troubles facing heavily-indebted households.
It also said the measures would include proposing a supplementary budget bill which would reflect additional fiscal spending, a reduction in budget revenue projection and readjustments of public finances.
Local media and analysts have said the extra budget would amount to around 10 trillion won ($9 billion), or around 1 percent of the annual gross domestic product standing at 1,273 trillion won, but ministry officials declined to confirm the figure.
It would be relatively small compared to past supplementary budgets aimed at stimulating the economy. In 2009, the government had drawn up an extra budget scaled at over 3 percent of the GDP to counter the global financial crisis.
($1 = 1111.6250 Korean won)
(agencies)
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