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S.Korea to set 9.7 bln USD aside for extra budget to bolster sagging economy

Xinhua, July 22, 2016 Adjust font size:

South Korea on Friday announced a plan to set 11 trillion won (9.7 billion U.S. dollars) aside for supplementary budget in the second half of this year to bolster sagging economy caused mainly by the ongoing restructuring in troubled shipbuilders and shipping lines.

The extra budget plan, which was approved during a cabinet meeting, would be submitted to the National Assembly next Tuesday to get a final green light, according to the Ministry of Strategy and Finance. The plan is expected to get approval during a parliamentary plenary session scheduled for Aug. 12 following a series of revisions.

This year's extra budget plan came after the country spent 11.6 trillion won in supplementary budget in 2015 to prop up the faltering economy. Among 11 trillion won for this year, 9.8 trillion won will be spent for an expanded fiscal expenditure, with 1.2 trillion won allocated to repay government debts.

The massive fiscal spending came as the government-led restructuring in shipbuilding and shipping industries triggered layoffs in the southeastern region where major shipyards are sited. Tens of thousands of workers are expected to lose their jobs, coming from shipbuilders and their subcontractors.

Much of the additional fiscal spending would be focused on helping create jobs and revitalizing regional economies, especially in the southeastern region. Fiscal funds would be allocated to policy lenders such as the Korea Development Bank (KDB) and the Export Import Bank of Korea to help them raise capital, which declined due to their exposure to major shipbuilders.

In addition to the extra budget, at least 17 trillion won will be allocated for fiscal support by changing the usage of public funds, expanding investment into public corporations and increasing policy funds like trade insurance.

The government predicted the expansionary fiscal stimulus raising its economic growth by 0.1-0.2 percentage points both this year and next year. About 68,000 jobs are forecast to be created by the fiscal spending. Endit