Seoul plans HK$135b boost for economy
South Korean scheme aims to help exporters amid pressure from weaker Japanese yen
South Korea unveiled a 19.3 trillion won (HK$135.1 billion) stimulus plan to support exporters under pressure from a weaker Japanese currency and revive an economy that grew last year at the slowest pace since 2009.
The package will boost growth by 0.3 percentage point and create 40,000 jobs, the Finance Ministry said.
Two trillion won of the spending will come from government investments and the rest needs approval from parliament, where President Park Geun-hye's New Frontier Party has a majority.
The plan is meant to reverse slower growth and spur consumption that has been hindered by household debt that reached a record level at the end of last year.
A stronger won, which has risen more than 21 per cent against the yen in the past six months, has hindered export-reliant companies such as Hyundai Motor and Samsung Electronics by making their products more expensive overseas.
Park's government announced plans for a stimulus package on the same day last month it lowered its growth forecast for this year to 2.3 per cent from 3 per cent. Finance Minister Hyun Oh-seok later said the government also faced a 12 trillion won tax shortfall.
Of the stimulus, three trillion won will be allocated for job creation and training services, while an equal amount will go towards supporting municipal governments.
A further 1.3 trillion won will support small and medium-sized exporters.
It is the government's biggest stimulus package since interventions to lift the nation out of financial crises in 1998 and 2009, the Finance Ministry said.
"With the extra budget, we will be able to see growth at the high end of the 2 per cent range this year," Hyun said at a briefing last week.
Korea posted quarterly growth of less than 1 per cent for seven consecutive periods. It grew 2 per cent last year, the slowest rate since 2009.
The Bank of Korea cited the recent depreciation of the yen when it cut its growth estimate for the year to 2.6 per cent from 2.8 per cent.
Earlier this month, Japan's central bank embarked on unprecedented monetary easing in an effort to end almost 15 years of deflation.