By Yoon Ja-young
The government will inject an additional 5 trillion won in "policy funds" before the end of the year to boost the economy, while also allowing more duty free shops to open.
Having announced in July that it will inject 26 trillion in 2014 to boost the economy, the government now says there will be an additional 5 trillion won.
The additional policy funds will be injected in the form of facility investments by state-invested public enterprises, financing for small and medium sized exporters by Korea Eximbank, and a facility investment fund for SMEs by the Korea Development Bank and other state-run financial firms.
It will also allow more duty free shops around the country to boost tourism. The number of tourists into Korea increased to 12.2 million last year from 9.8 million in 2011, mainly due to the growing number of Chinese tourists. While duty free shops are one of their top destinations, there are not enough stores to meet the demand.
The announcement comes amid concerns the country's economy is losing steam.
The Ministry of Strategy and Finance said in its economic trend report that "the momentum of economic recovery is weak, with low inflation continuing and industrial output turning to contraction."
Mining and manufacturing production decreased by 3.8 percent in August, blamed on the summer vacation season and strikes in the automobile industry. Consumer prices, meanwhile, rose by only 1.1 percent in September, marking the lowest inflation rate in seven months.
The report said that on top of sluggish investment and consumption, "external risk factors such as tapering in the United States, the weakening Japanese yen, and geopolitical risks in the Middle East are adding to the difficulties."
The government expects that should the stimulus package work, it could further increase the growth rate by 0.1 to 0.2 percentage point for the fourth quarter.
The weakening yen is also a focus of policy. The Japanese currency has lost value to be traded at below 960 won per 100 yen. This comes amid concerns there will be additional quantitative easing by the Abe administration, marking the weakest level for the yen since back in Aug 2008.
"The effect of the weak yen on total exports is not huge as of yet, but exports to Japan is becoming sluggish and small companies are suffering worsening profitability," said Jeong Eun-bo, deputy finance minister.
"If the yen continues to weaken, there will be a negative effect on exports as well as corporate competitiveness," he said.
The government plans to promote insurance products that protect against volatile foreign exchange rates. As the first step, the insurance premium will be halved for small companies exporting to Japan.
The Korea Finance Corporation, Korea EXIM Bank and the Industrial Bank of Korea will fund over 1 trillion won to support small exporters to Japan to ease the liquidity problem.
The government also wants companies to make use of the weak yen to enhance their competitiveness. This could come in the form of purchasing facilities from Japan which are now less expensive. In such cases, the companies will get additional government benefits, such as a cut in customs duty.
The government will inject an additional 5 trillion won in "policy funds" before the end of the year to boost the economy, while also allowing more duty free shops to open.
Having announced in July that it will inject 26 trillion in 2014 to boost the economy, the government now says there will be an additional 5 trillion won.
The additional policy funds will be injected in the form of facility investments by state-invested public enterprises, financing for small and medium sized exporters by Korea Eximbank, and a facility investment fund for SMEs by the Korea Development Bank and other state-run financial firms.
It will also allow more duty free shops around the country to boost tourism. The number of tourists into Korea increased to 12.2 million last year from 9.8 million in 2011, mainly due to the growing number of Chinese tourists. While duty free shops are one of their top destinations, there are not enough stores to meet the demand.
The announcement comes amid concerns the country's economy is losing steam.
The Ministry of Strategy and Finance said in its economic trend report that "the momentum of economic recovery is weak, with low inflation continuing and industrial output turning to contraction."
Mining and manufacturing production decreased by 3.8 percent in August, blamed on the summer vacation season and strikes in the automobile industry. Consumer prices, meanwhile, rose by only 1.1 percent in September, marking the lowest inflation rate in seven months.
The report said that on top of sluggish investment and consumption, "external risk factors such as tapering in the United States, the weakening Japanese yen, and geopolitical risks in the Middle East are adding to the difficulties."
The government expects that should the stimulus package work, it could further increase the growth rate by 0.1 to 0.2 percentage point for the fourth quarter.
The weakening yen is also a focus of policy. The Japanese currency has lost value to be traded at below 960 won per 100 yen. This comes amid concerns there will be additional quantitative easing by the Abe administration, marking the weakest level for the yen since back in Aug 2008.
"The effect of the weak yen on total exports is not huge as of yet, but exports to Japan is becoming sluggish and small companies are suffering worsening profitability," said Jeong Eun-bo, deputy finance minister.
"If the yen continues to weaken, there will be a negative effect on exports as well as corporate competitiveness," he said.
The government plans to promote insurance products that protect against volatile foreign exchange rates. As the first step, the insurance premium will be halved for small companies exporting to Japan.
The Korea Finance Corporation, Korea EXIM Bank and the Industrial Bank of Korea will fund over 1 trillion won to support small exporters to Japan to ease the liquidity problem.
The government also wants companies to make use of the weak yen to enhance their competitiveness. This could come in the form of purchasing facilities from Japan which are now less expensive. In such cases, the companies will get additional government benefits, such as a cut in customs duty.
![[INTERVIEW] How AmazeVR revolutionizes aespa's LYNK-POP concert](https://img.koreatimes.co.kr/upload/thumbnailV2/4431833759c44bdaa414cb314e90f2fe.jpg/dims/resize/178/optimize)
![[REVIEW] Musical 'Monte Cristo' returns with riveting tale of vengeance, love](https://img.koreatimes.co.kr/upload/thumbnailV2/3934be1fa6844478b619a015d610bc5b.jpg/dims/resize/178/optimize)
![[INTERVIEW] Meet the man behind giant rubber ducks that once took over Seoul](https://img.koreatimes.co.kr/upload/thumbnailV2/df32c60c8204448e98ccdb9841366bec.jpg/dims/resize/178/optimize)
