South Korea yesterday announced a record 28.9 trillion won (US$20.9 billion) extra budget aimed at pulling the country back from the brink of its first recession in 11 years.
The Strategy and Finance Ministry said the budget — twice the size of extra spending during the 1998 Asian economic crisis — will save and create jobs, support small businesses, invest in new growth engines and help the poor and the jobless.
The ministry said in a statement that the budget, to be submitted to parliament this month, “puts priority on overcoming the economic crisis early.”
The export-driven economy has been hard hit by the global slump as overseas markets shrink. It declined 5.6 percent quarter-on-quarter in October to December, the steepest fall since 1998.
South Korean Finance Minister Yoon Jeung-hyun has said the economy will likely contract 2 percent this year and lose 200,000 jobs, while many private researchers expect a much steeper downturn.
The extra spending is equivalent to about 2 percent of GDP. It is expected to boost growth by 1.5 percentage points, the ministry said.
“The global economic downturn is taking place at a faster pace than expected in terms of its depth and breadth,” Yoon told reporters after the Cabinet approved the extra spending.
“Reflecting changed economic conditions at home and abroad, the government decided to draw up this extra budget to overcome the current crisis as quickly as possible,” he said.
Some 3.5 trillion won will be used to save and create jobs, including job-sharing schemes, the ministry said. The aim is to create 552,000 jobs in addition to those saved.
The number of people employed fell last month by 142,000 year-on-year, the largest reduction since September 2003.
Some 4.5 trillion won will go to support small and medium-size firms.
The budget sets aside 3 trillion won to reinvigorate the regional economy. Some 2.5 trillion will be invested in improving advanced education and in new growth engines — such as the government’s “green new deal” spending on environmentally friendly technology and projects.
The sum of 4.2 trillion won has been set aside to help low-income and jobless people.
The new spending totals 17.7 trillion won. The remaining 11.2 trillion won will largely be used to fund previously announced projects and tax cuts.