South Korea Announces Additional, Massive Stimulus Package

Includes: EWY, KF
by: Emerginvest

Early Monday morning, the government of South Korea announced that they would be implementing a new stimulus plan on the order of 14 trillion won (approximately $11 billion). The changes are designed to combat the slowing growth occurring in South Korea in the wake of the global credit crisis.

The changes are set to take effect next year - after strong debate within the Korean government on how best to stimulate the economy. According to a Wall St. Journal Article on Mondayyesterday entitled: “South Korea Plans $11 Billion in Tax Cuts, Other Stimulus,”

The Ministry of Strategy and Finance said 90% of the new spending will be sent to provincial and local governments for infrastructure and construction projects. Almost two-thirds of the spending will occur in the first half of next year, a step that recognizes how quickly the global slowdown may impact South Korea.

The package comes at a time when projected country growth is expected to be just under 4%. The breakdown seems to be heavily weighted on new government spending. The article further states that:

Of the total, 11 trillion won will come from new spending and 3 trillion won will come from tax cuts. Government officials have been discussing ideas for stimulating the economy for the past two weeks. Monday’s announcement marked the first time officials placed a value to their planning.

This move comes on top of the $120 billion bailout package Korea announced earlier in the month. Between the two massive packages announced, it seems that Korea has been quite proactive in the response to the global crisis. Whether or not the stimulus package will keep growth buoyant is yet to be seen, however according to Emerginvest, the KOSPI did jump a few percentage points in response to the news on Monday, eventually falling to up just 0.71%.