Roundup: S. Korea unveils Q1 fiscal stimulus package to bolster exports, consumption

South Korea's finance ministry on Wednesday announced a new fiscal stimulus package for the first quarter of 2015 on worries that both exports and private consumption may slow down further amid global economic slump and soured consumer sentiment.

The new package, including increased fiscal expenditure than initially scheduled, came just three weeks after new Finance Minister Yoo Il-ho took office.

It included growth in government spending and policy loans by more than 21.5 trillion won (18 billion U.S. dollars) during the January-March period.

Fiscal expenditure by both central and municipal governments will increase by 6 trillion won during the quarter to reach 144 trillion won.

It was expected to raise the economy's growth by 0.2 percentage points this year.

Eight policy lenders, including Korea Development Bank (KDB) and Industrial Bank of Korea (IBK), plan to expand policy loans by about 15.5 trillion won in the quarter, aiming at lifting the total to reach 115.9 trillion won at the end of March.

Investment from energy-related public corporations, including the state-run power provider Korea Electric Power Corp., will be expanded from 4 trillion won to 5 trillion won in the quarter.

The stimulus plan came amid rising concerns about the United States and China, the world's top two economies, which boosted downside risks to emerging economies.

Japan's cut in its benchmark interest rate to the negative range, in addition to its quantitative easing, is believed to have triggered South Korea's further stimulus package.

Concerns had spread in South Korea that the end of positive effect from supplementary budget and consumption tax cut at the end of last year may lead to a so-called consumption cliff, or an abrupt stop in private expenditure.

The finance ministry targeted its 2016 economic growth at 3.1 percent, but economic indicators in January drew a bleak picture, bolstering up pessimistic economic forecasts.

South Korea's exports tumbled 18.5 percent in January from a year earlier, the biggest monthly decline in over six years since August 2009 when the global financial crisis hit the global economy, including South Korea.

The country's private consumption rose 1.2 percent in the third quarter on a quarterly basis and grew 1.5 percent in the next quarter, but the end of consumption-boosting policy effects fueled fears for the consumption cliff.

Following European suits, Japan opened an era of minus interest rate. It will result in the Japanese yen's weakness, increasing pressure on South Korean exporters that are competing with Japanese rivals in various sectors such as electronics and automobiles.

The expected interest rate hike in the United States and economic slowdown in China, South Korea's Number 1 trading partner, also cast a cloud on South Korea's economic outlook.

Seoul plans to expand trade-linked public loans by 10.6 trillion won in the first quarter to support exports, while extended consumption tax cuts by six more months until June to bolster private consumption.

The government plans to encourage local automakers to cut prices further for an auto sales increase, while urging key department stores and duty-free shops to hold promotion events to attract Chinese tourists during the Lunar New Year holiday period.

Seoul plans to allow group tourists from China to receive electronic visa in an easier way, while offering permits in advance to increased flights from China. Enditem