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S.Korea to provide 17 bln USD fiscal stimulus after cutting economic outlook

Xinhua, June 28, 2016 Adjust font size:

South Korea on Tuesday announced a plan to provide at least 20 trillion won (17 billion U.S. dollars) in fiscal stimulus in the second half of this year, including a 10 trillion-won supplementary budget plan.

The plan for the second-half economic policy direction was confirmed at a meeting of economic ministers chaired by President Park Geun-hye to boost the lackluster economy amid the ongoing corporate restructuring and the British referendum to leave the European Union (EU).

About 10 trillion won would be allotted to the extra budget plan by using last year's tax surplus, estimated at 1.2 trillion won, and this year's excess tax revenue. No government bonds will be issued to raise the funds.

Additional fiscal stimulus, excluding the supplementary budget plan, worth at least 10 trillion won will be created by changing the usage of public funds, investment by state-owned enterprises and expanded policy loans.

The government expected the fiscal stimulus package to raise the economy's growth by 0.25-0.3 percentage points this year.

It came as the government cut its 2016 economic growth outlook to 2.8 percent from 3.1 percent forecast at the end of last year.

The government's downgraded outlook was in line with the Bank of Korea (BOK)'s growth forecast of 2.8 percent, but it was higher than the state-run Korea Development Institute (KDI)'s 2.6 percent.

The International Monetary Fund (IMF) and the Organization for Economic Cooperation and Development (OECD) had put South Korea's growth forecast for 2016 at 2.7 percent. Endit