South Korea has unveiled $5.23 billion stimulus measures to boost the domestic economy that is severely hit by the global slowdown.
The government has allocated about KRW 4.6 trillion for this year and KRW 1.3 trillion for next year. The overall KRW 5.9 trillion is available without an expansion of the government's budget, the Ministry of Strategy and Finance said Monday.
The stimulus includes exemptions from capital gains taxes on home sales, reduction in the sales tax on purchase of new cars and home appliances and also a cut in housing transaction costs.
In June, the government had initiated a stimulus worth KRW 8.5 trillion. Together with the latest action, the total package is equivalent to 1 percent of gross domestic product.
The government is refraining from providing more support, instead reserving the fiscal firepower if things deteriorate further in the event of a deep global slowdown. Some of the measures announced today will require the approval of lawmakers.
Citing the country's persistent economic and financial stability in the volatile global environment, Fitch Ratings last week upgraded South Korea's sovereign rating to 'AA-' from 'A+'. The agency forecast 2.5 percent growth this year, before accelerating to 3.6 percent in 2013.
Economists expect support from the central bank through a reduction in interest rate. The Bank of Korea is seen slashing rates by a quarter point to 2.75 percent this week.
Asia's fourth-largest economy expanded only 0.3 percent in the second quarter, following a 0.9 percent growth in the first three months. The government lowered its 2012 growth forecast to 3.3 percent from 3.7 percent.
by RTT Staff Writer
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