South Korean public companies will increase investment for next year by 9 trillion won (US$7.1 billion) and spend more in the first half to boost the slumping economy, officials said yesterday.
Industrial output fell at the fastest rate ever recorded last month, amid growing concerns that weak domestic demand and exports could drag the economy into recession.
In a plan reported to South Korean President Lee Myung-bak, 25 major public firms earmarked 57 trillion won for their investment next year, up 18.5 percent from this year, the Ministry of Strategy and Finance said.
The companies will spend 61 percent of their investment in the first half in a bid to help South Korea ride out an economic downturn early, it said.
Investment in roads, railways and other social infrastructure facilities will be increased from 33.4 trillion won this year to 40.4 trillion won next year, it said.
Investment in energy-related facilities will rise from 12.1 trillion won this year to 14.7 trillion won next year.
Nine state-run financial institutions set aside an extra 25 trillion won next year for loan support and an extra 55 trillion won to support export insurance and guarantees, it said.
The government has cut its growth forecast for next year by one percentage point to 3 percent as exports shrink and the domestic economy stays sluggish.
Lee has said the economy could shrink in the first half of next year for the first time since the 1997 to 1998 Asian financial crisis.
The National Statistical Office said yesterday that industrial production shrank 14.1 percent last month from a year earlier, following a 2.3 percent slump year on year in October. The decline last month was the sharpest since data began to be compiled in 1970.
Meanwhile, South Korea’s state pension fund — the country’s largest institutional investor — will post its first-ever loss this year because of tumbling stock prices, officials said yesterday.
The Ministry of Health, Welfare and Family Affairs, which supervises the fund, said the National Pension Service posted a 0.75 percent loss, amounting to 1.76 trillion won as of last Friday.
It marks the first annual loss since the fund, which now has more than 230 trillion won in holdings, was created in 1988.
The ministry said the problem stems from its investment in stocks, which reported a loss of 41.20 percent.
South Korea’s benchmark KOSPI stock market index has fallen nearly 40 percent so far this year amid the global financial meltdown, with overseas bourses similarly hard hit.
Last year the fund reported a 7.05 percent return on assets.
The ministry said on Monday the pension fund would reduce its stockholdings next year from the current 29.7 percent to 20.65 percent of total assets. It plans to increase its holdings of bonds and other investments from 66.4 percent to 73.4 percent.