South Korea Unveils $11 Billion Growth Plan as Economy Weakens
Friday, August 01, 2014
South Korea unveiled 11.7 trillion won ($11.4 billion) in government initiatives to shore up Asia’s fourth-largest economy after growth slumped to the weakest pace in more than a year in the second quarter.
President Park Geun Hye’s administration, contending with a drop in consumer spending in the aftermath of an April ferry disaster, will deploy funds from this year’s budget and step up deployment of cash from government-run programs, it said in a statement today. State-backed lenders will extend 29 trillion won in credit. The Bank of Korea expanded a cheap-loan program for small companies.
The measures, including support for small businesses and the poor, were released hours after a government report showed the economy expanded 0.6 percent in April-to-June from the previous quarter, less than forecast. The slowdown raises the stakes for Park’s longer-term plans to reduce South Korea’s reliance on large conglomerates and boost the role of small and innovative enterprises.
“The government and the Bank of Korea are determined to reverse weak sentiment,” said Chang Jae Chul, an economist at Citigroup Inc. in Seoul. “A rate cut became more likely today with the central bank and the government announcing support measures together.”