South Korea unveiled a KRW 17.3 trillion, or $15.4 billion, extra budget on Tuesday to revive the economy and to support exporters reeling under a sliding yen.
The extra budget will make up for a KRW 12 trillion shortfall in tax revenues, resulting from the economic slowdown, and finance KRW 5.3 billion in new spending, the Ministry of Strategy and Finance said.
Public funds will contribute KRW 2 trillion of the stimulus spending. The package is expected to add 0.3 percentage points to the gross domestic product this year and create 40,000 jobs.
The new government under President Park Geun-hye has promised to strengthen the economy by promoting small and medium-sized enterprises. Park had also vowed to create more than 300,000 jobs in the country.
The package is the largest since the KRW 28.4 trillion-stimulus plan unveiled in 2009 to lift the economy out of the Global Financial Crisis.
Earlier this month, the government announced plans to introduce measures to cut tax on home purchases and reduce borrowing costs to revamp the country's flagging property market.
Last month, the Finance Ministry lowered its growth forecast for this year to 2.3 percent from 3 percent projected earlier. South Korea's economic growth plunged to a three-year low in 2012 with the gross domestic product growing by just 2 percent.
The central bank also cut its 2013 GDP outlook last week to 2.6 percent from the 2.8 percent projected in January. Growth is seen at 3.8 percent in 2014.
Unlike most major Asian economies, South Korea is heavily reliant on overseas markets to drive growth. The recent weakening of the Japanese yen due to massive stimulus announced by the Bank of Japan, is hurting South Korean exports and has the potential to serve as a drag on the economy in the coming months.
Despite mounting pressure to ease monetary policy, the central bank maintained its key interest rate at 2.75 percent for the sixth consecutive month in April.
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