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S. Korea Announces $11.4 Bln Stimulus Package as Economic Growth EasesThursday, July 24, 2014 > 09:29:04
South Korea announced a $11.4 billion stimulus plan to stimulate the economy, which logged its slowest growth in more than a year on weak private spending.
The finance ministry announced policy financing support for small businesses and to boost household income. The ministry increased the lending ceiling for businesses to $15 billion from $10 billion. It adjusted the loan-to-value ceiling of home loans to 70% and debt-to-income ceiling to 60%.
In order to support household spending, the ministry plans to introduce tax schemes that encourage companies to spend more on employment and salaries.
Of the total $11.4 billion or KRW $11.7 trillion stimulus, KRW 26 trillion would be funded with help of state-backed lenders. The finance ministry intervened soon after the Bank of Korea released its GDP data.
The Bank of Korea trimmed its outlook for 2014 to 3.7% from 3.9%. Even the current projection is considered as too optimistic by economists.
South Korea's tourism experienced its worst period after the ferry disaster in April killed more than 300 people. The economy expanded only 0.6% in the second quarter, the slowest since the first quarter of 2013, following the first quarter's 0.9% growth. Private consumption fell 0.3% as expenditure on both goods and services decreased. Meanwhile, government spending was up 0.4%.
Captial formation fell 0.2% mainly due to the decline in investment in intellectual property products. Exports and imports advanced 1.9% and 0.8%, respectively.