The South Korean government is to soon propose a supplementary budget of about 10 trillion won (US$8.53 billion) to the South Korean National Assembly, the government said yesterday, as it tackles Brexit turmoil in financial markets, weak exports and a corporate overhaul of the country’s shipping and shipbuilding industries.
South Korean President Park Geun-hye called on all government ministries to have the supplementary budget ready as soon as possible.
“Unrest in global financial markets has been growing from Brexit. Uncertainties over the Chinese economy and geopolitical risks from North Korea are still pressuring our economy,” she said at a meeting of economy-related officials and lawmakers.
“The economic situation inside and outside our country is more serious than ever. If we do not take extraordinary measures there are concerns growth and employment will contract in the second half of the year,” she added.
The supplementary budget is to be spent on stimulus measures, including a big retail spending drive, rebates on appliances, a tax incentive to replace older diesel cars and additional unemployment benefits for shipbuilding workers.
The extra budget is to be mostly funded from a surplus in tax revenue for the first half of the year, avoiding the need to sell more treasury bonds and run up additional government debt.
Equities cautiously inched up after the announcement, as an extra budget had been widely expected, given South Korea’s soft economic growth.
Shares were up by 0.4 percent, while the won rose 0.8 percent against the US dollar, helped partly by offshore factors.
“This looks like the finance ministry just pushed the ball over to the Bank of Korea again,” said Stephen Lee, an economist at Samsung Securities.
“What I’m a bit concerned about is that tax revenue going forward might not be as great as it was in the first half of the year... We might face some difficulties later if the Brexit aftermath on exports and capex [capital expenditures] is worse than expected,” Lee added.
Lee said the Bank of Korea might face pressure to cut interest rates again after it lowered them to a record-low 1.25 percent to bolster economic growth earlier this month.
South Korean Minister of Strategy and Finance Yoo Il-ho last week said a supplementary budget would have to be ratified before the middle of next month to have maximum effect.
Lawmakers in both ruling and opposition parties favor the extra budget.
Reflecting more difficult conditions inside and outside the country, the South Korean Ministry of Strategy and Finance lowered its growth forecast for this year from the 3.1 percent projected in December last year to 2.8 percent.
Inflation for this year was also downgraded to 1.1 percent from the 1.5 percent previously forecast.
The extra budget comes as the latest buffer against possible fallout from the corporate restructuring of the country’s struggling shipping and shipbuilding firms.
Earlier this month, the government and central bank said they would create an 11 trillion won fund to support two state-run banks most exposed to the industries.
Lee noted global financial markets were reacting more sensitively to political events around the world, saying there was a danger of volatility spiking again when Italy holds its own referendum regarding constitutional reforms in October and from the US presidential election on Nov. 8.
JITTERS: Nexperia has a 20 percent market share for chips powering simpler features such as window controls, and changing supply chains could take years European carmakers are looking into ways to scratch components made with parts from China, spooked by deepening geopolitical spats playing out through chipmaker Nexperia BV and Beijing’s export controls on rare earths. To protect operations from trade ructions, several automakers are pushing major suppliers to find permanent alternatives to Chinese semiconductors, people familiar with the matter said. The industry is considering broader changes to its supply chain to adapt to shifting geopolitics, Europe’s main suppliers lobby CLEPA head Matthias Zink said. “We had some indications already — questions like: ‘How can you supply me without this dependency on China?’” Zink, who also
At least US$50 million for the freedom of an Emirati sheikh: That is the king’s ransom paid two weeks ago to militants linked to al-Qaeda who are pushing to topple the Malian government and impose Islamic law. Alongside a crippling fuel blockade, the Group for the Support of Islam and Muslims (JNIM) has made kidnapping wealthy foreigners for a ransom a pillar of its strategy of “economic jihad.” Its goal: Oust the junta, which has struggled to contain Mali’s decade-long insurgency since taking power following back-to-back coups in 2020 and 2021, by scaring away investors and paralyzing the west African country’s economy.
BUST FEARS: While a KMT legislator asked if an AI bubble could affect Taiwan, the DGBAS minister said the sector appears on track to continue growing The local property market has cooled down moderately following a series of credit control measures designed to contain speculation, the central bank said yesterday, while remaining tight-lipped about potential rule relaxations. Lawmakers in a meeting of the legislature’s Finance Committee voiced concerns to central bank officials that the credit control measures have adversely affected the government’s tax income and small and medium-sized property developers, with limited positive effects. Housing prices have been climbing since 2016, even when the central bank imposed its first set of control measures in 2020, Chinese Nationalist Party (KMT) Legislator Lo Ting-wei (羅廷瑋) said. “Since the second half of
AI BOOST: Next year, the cloud and networking product business is expected to remain a key revenue pillar for the company, Hon Hai chairman Young Liu said Manufacturing giant Hon Hai Precision Industry Co (鴻海精密) yesterday posted its best third-quarter profit in the company’s history, backed by strong demand for artificial intelligence (AI) servers. Net profit expanded 17 percent annually to NT$57.67 billion (US$1.86 billion) from NT$44.36 billion, the company said. On a quarterly basis, net profit soared 30 percent from NT$44.36 billion, it said. Hon Hai, which is Apple Inc’s primary iPhone assembler and makes servers powered by Nvidia Corp’s AI accelerators, said earnings per share expanded to NT$4.15 from NT$3.55 a year earlier and NT$3.19 in the second quarter. Gross margin improved to 6.35 percent,
RSS