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govt-economic stimulus

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(Globalpost/GlobalPost)

SEJONG, March 27 (Yonhap) -- South Korea will unveil a set of measures this week aimed at boosting the country's economy, providing a major clue to what direction the new government will take in leading the economy, sources said Wednesday.

The measures including a possible extra budget and the overall economic policy direction for President Park Geun-hye will be announced on Thursday afternoon, according to the sources.

In the face of the slowing economic recovery, the government has been considering drafting an additional budget. Though the scale of the budget has yet to be determined, market watchers have predicted the size will be about 10 trillion won (US$9.04 billion).

This would mark the first supplementary budget in four years. South Korea has not put forth an extra budget since 2009 when it crafted 28.4 trillion won worth of additional spending in a bid to tide over the global financial crisis.

The government might also revise down its growth outlooks to reflect the latest economic conditions. In December, the government forecast that the economy will grow 3 percent this year, an estimate that many experts see as too optimistic given the uncertainty lingering at home and abroad.

Sources say that the government is considering lowering its growth outlook to the median or upper end of the 2 percent range. They added that the government could also cut its job creation target of 320,000 for this year in consideration of toughening labor market conditions.

On the macroeconomic front, the government is expected to renew its commitment to frontloading its budget spending in an effort to boost investment and consumption.

What is unclear is whether the government will mention "flexibility" for the country's monetary policy. The government's stance on monetary policy drew market attention after Finance Minister Hyun Oh-seok told reporters on Monday that the "policy package" that the government is reviewing could touch upon financial aspects, which surely include policies related to interest rates.

Market watchers interpreted his remarks as an indication that the government might be pushing to lower interest rates to help bolster the economy. For March, the country's central bank froze its benchmark interest rate at 2.75 percent for the fifth straight month.

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http://www.globalpost.com/dispatch/news/yonhap-news-agency/130327/govt-economic-stimulus