Korea to Spend Nearly
$11 Billion to Stimulate Economy
(VOA) — South Korea has announced a robust government spending
to prevent its economy from slowing down too rapidly, as a result of
crisis. With a potential drop in exports on the horizon, this is the latest
move by Seoul to shield Asia’s fourth-largest economy from the global credit
squeeze. VOA’s Kurt Achin has more from the South Korean capital.
Korean government ministers announced a spike in government
plans Monday, aimed at stimulating the economy in the face of global slowdown.
Seoul says it will spend nearly $11 billion above and beyond
the budget it submitted to lawmakers earlier this month. About
$4 billion is earmarked for infrastructure projects, such as
building hospitals and schools. The rest of the funds are to
provide relief for small and medium-sized businesses and expand
investment by public companies.
South Korean Finance Minister Kang Man-su says the increased
spending is a direct response to the financial crisis.
He says financial market uncertainties have been aggravated
and are now exerting an impact on the real economy.
Only weeks ago, South Korea predicted the country’s economy
would grow this year by five percent. Kang says Monday’s stimulus
package reflects updated, more pessimistic assumptions.
He says the economy may expand by only around three percent
next year. He says it will difficult to achieve growth, if global
economic conditions further worsen.
South Korean analysts have been especially alarmed by a drop
in export growth to a 13-month low in October. Exports are a
key driver of South Korea’s economy, which is the world’s 13th
Several major American banks collapsed last month,
because of so-called "toxic assets" in their holdings.
That caused confidence between major international lenders
to plunge, as
each institution began doubting whether others could repay short
South Korea’s currency, the Won, nosedived in recent weeks,
as investors took refuge in the American dollar, which they perceive
for now as safe. In a radio address, earlier Monday, South Korean
President Lee Myung bak said that volatility problem has been
He says South Korea’s recent currency swap arrangement with
the United States has alleviated concerns that South Korea would
not have enough dollars to conduct its trade activities.
The swap deal allows South Korea to borrow up to $30 billion,
on short notice, in exchange for deposits in Korean won. The
deal is seen as largely symbolic, because South Korea already
possesses more than $230 billion in foreign reserves.