South Korea plans to implement a macroeconomic policy package worth about 40.7 trillion won (US$39.7 billion) to kick-start an economic recovery beset by anemic domestic demand, slowing exports growth and deepening uncertainties at home and abroad, the finance ministry said Thursday.
The government will also execute its macroeconomic policy in an "expansionary" manner until its intended impact materializes, the ministry added. The stance will be maintained when drawing up a budget for next year as well.
The measures are a part of the government's economy management plan along with other broad policy directions unveiled on Thursday, with newly inaugurated Finance Minister Choi Kyung-hwan and his economic team serving as the leaders, according to (Yonhap) news agency.
"We will run our fiscal stance in an expansionary manner during the second half and in 2015 so as to consolidate the base for the economic recovery," the ministry said. "The expansionary stance will be in place until its impact materializes." The government plans to inject 40.7 trillion won as part of what it calls a macroeconomic policy package consisting of fiscal, financial, tax and regulatory reforms. Of the total, 21.7 trillion won will be spent during the second half of this year, according to the ministry.
In terms of fiscal support alone, the government will inject 11.7 trillion won during the second half, which it expects will help raise the country's gross domestic product by 0.1% in 2014 and another 0.1% in 2015.
The plan comes on the backdrop of grim outlooks that the Korean economy might be slipping into a protracted low growth trend in the face of toughening situations at home and abroad. Reflecting the risks, the government on Thursday revised downward its growth outlook for this year to 3.7% from 3.9%.
Of 21.7 trillion won set aside for the second half of this year, 8.6 trillion won will be used to help low-income people purchase homes, support small businesses and help the tourism industry.
The government will give an additional 10 trillion won as policy financing for small businesses through state-run banks. About 16 trillion won worth of support related to foreign currency and other kinds of a macroeconomic policy mix will also be provided.