SEOUL, May 10: South Korea said on Friday it would allocate nearly three-quarters of the $5 billion worth of additional fiscal spending plans in the next seven weeks to lift a still slow recovery in Asia’s fourth-largest economy.
The government of President Park Geun-hye, in office since late February, has cut this year’s economic growth views and introduced a supplementary budget calling for increasing this year’s fiscal spending by 5.4 trillion won ($4.95 billion).
The finance ministry said in a statement the cabinet council approved its plan to allocate 3.9 trillion won, or 72.4 percent of the new money, for the period until the end of June to maximise the stimulative effect.
This means fiscal spending allocated for the April-June quarter would rise to 82.9 trillion won, 13 percent more than the amount for the comparable 2012 period, from 79 trillion won planned before the supplementary budget bill was introduced.
But actual fiscal expenditure could still be different from the allocated budget.
Government spending accounts for about 16 percent of South Korea’s total gross domestic product.
South Korea’s economy grew by a faster-than-expected 0.9 percent in the first quarter on a sequential basis, the fastest in two years, the central bank estimated earlier, but recent indicators raised concerns about a rapid cooling ahead.
The yen’s sharp slide to four-year lows against the dollar now puts an additional drag on South Korea’s trade-reliant economy, already hit by weak household spending on a slump in the domestic property market and heavy consumer debt.
On Thursday, South Korea’s central bank cut interest rates in a surprise move, which many took as aimed at easing the upward pressure on the won against the yen as well as helping maximise the effect of government stimulus plans. (AGENCIES)
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