S. Korea unveils 5.9 tln won worth of stimulus measures

South Korea unveiled an additional 5.9 trillion won (US$5.23 billion) worth of fiscal support Monday as part of its efforts to boost domestic demand amid worries tough overseas market conditions are casting a pall over the country's export-driven economic growth.

According to the finance ministry, the government will push for additional fiscal support worth 4.6 trillion won this year and 1.3 trillion won for next year. The support will come mostly in the form of tax cuts intended to bolster domestic consumption, the ministry said.

The move comes after the government announced in June that it will inject about 8.5 trillion won worth of fiscal support during the second half of this year.

Under the plan, capital gains taxes will be exempted for five years for newly built homes purchased this year. Transaction tax rates will also be halved for home purchases taking place during the rest of this year, the ministry said.

In addition, the government will cut special consumption taxes on large home appliances such as TVs and vehicles by 1.5 percentage points during the rest of this year.

"We came up with these measures by capitalizing on every possible fiscal and administrative option available at this point, and they were mostly focused on areas where the effect can be realized within this year," the ministry said in a press release.

The government has been under growing calls to set up a supplementary budget to help revitalize the country's economy.

The finance ministry has refused to do so, however, claiming the current conditions do not warrant such a measure and that the government can manage simply by spending its existing funds more efficiently.

Finance Minister Bahk Jae-wan earlier said measures to spur the country's slumping economy may include an overhaul of the country's tax system to make more funds available.

Slumping exports have been affecting the country's economic growth in recent months.

According to the latest data by the central bank, the gross domestic product grew 0.3 percent during the April-June period.

This is less than half of a 0.9 percent on-quarter expansion tallied in the first quarter and marks the slowest growth since the fourth quarter of last year.

The government still forecast the economy to grow around 3 percent this year, but many worry that the growth rate may fall into the 2 percent range due to shrinking exports.

The latest stimulus measures are expected to boost economic growth by 0.06 percentage point this year and 0.10 percentage point for next year, the ministry said.

Some experts still worry that the additional fiscal spending plans could make it harder for the government to achieve a balanced budget next year due to increased expenditures and less tax revenue. (Yonhap News)