South Korea proposed Tuesday a 17.3 trillion won ($15.4 billion) supplementary budget to help boost the economy, including further spending on defence at a time of heightened tensions with the North.
The first fiscal stimulus package for four years, which requires parliamentary approval, will cover a 12-trillion won shortfall in revenue and provide 5.3 trillion won in new spending, the finance ministry said.
The spending is mostly aimed at job creation, support for small and medium-sized firms and strengthening welfare programmes, a ministry statement said.
The South's economy -- Asia's fourth-largest -- has been hit by sluggish export demand from Europe and the United States and expanded just 2.0 percent in 2012, its slowest pace for three years.
The central bank recently slashed its forecast for economic growth for this year to 2.8 percent from 3.2 percent.
The ministry predicted the extra budget would help create 40,000 jobs and boost growth by 0.3 percentage points in 2013 and 0.4 points in 2014.
It included an extra 217.4 billion won in defence spending as Seoul is engaged in a stand-off with the North, which has threatened "thermo-nuclear war".
Expenditure will focus on military installations and weaponry on islands near the tense Yellow Sea border, and training "white hackers" to guard against cyber attacks from the North.
Finance Minister Hyun Oh-Seok said the extra budget's initial strain on the South's fiscal health would be outweighed by its long-term impact on growth.
"The slow growth that has plagued our economy for the past two years is exacerbating the difficulty in people's lives and dampening our economic vitality," Hyun said.
The South's economy, which depends on exports for more than half of its growth, has also been squeezed by a strengthening of the won against the yen, which blunts competitiveness of the key exporters such as Hyundai or Samsung.