SEOUL: South Korea on Wednesday unveiled a stimulus package, including an extra six trillion won ($4.94 billion) in public spending, to bolster an economy struggling with falling exports and high youth unemployment.
The package, announced by the finance ministry, came as Asia’s fourth-largest economy in Asia saw its exports plunge 18.5 percent on-year in January—the sharpest decline for more than six years.
Exports account for more than 50 percent of the country’s GDP, according to the World Bank.
“The government will mobilize all available means and resources in order to boost domestic consumption and exports in the first quarter to March and to help create new jobs,” the ministry said in a press statement.
It will front-load government budgets and policy loans to businesses during the three-month period, injecting an additional 21.5 trillion won ($17.4 billion).
Public spending for the first quarter will be increased by six trillion won to 144 trillion won and lending by policy banks will be jacked up by 15.5 trillion won to 115.9 trillion won.
It will also extend until June a program to cut consumption tax on passenger cars, which was set to finish at the end of December.
Domestic auto sales plunged 40 percent last month after South Korea rolled back a 1.5 percentage point cut in auto consumption tax.
“We expect the increased front-loading to push up growth by 0.2 percentage points in the first quarter,” Deputy Finance Minister Lee Chan-Woo was quoted as saying by Yonhap news agency on Tuesday.
“We have to keep the momentum alive in the first quarter so that the economy continues moving on in the following quarters,” he said.
The Bank of Korea last month revised its GDP growth forecast down from 3.2 percent to 3.0 percent for this year, citing factors like the signs of a slowdown in China—the South’s biggest export market.
Last year, the South’s economy grew at its slowest pace since 2012 as exports faltered in the face of a global slowdown and rock-bottom oil prices.
Exports for the whole of 2015 fell 8.0 percent—the first contraction for three years.