More official stimulus is offeredThe government will provide an additional 1.6 trillion won ($1.3 billion) of support for the ailing economy through the end of the year, committing the funds via social benefit channels.
Minister of Economy and Finance Hong Nam-ki announced Wednesday that 14 state-backed funds will alter budgetary plans for the rest of the year to help the slowing economy.
Under the plan, 700 billion won will be used for unemployment benefits, while around 270 billion won will be set aside for pension allowances. Hong added that 1 trillion won worth of investment from state-backed companies and institutions, planned for 2020, will be made this year, bringing the total annual investment by the organizations to 55 trillion won.
The announcement is just the latest as the government works to support the weak economy through spending.
A day earlier, the Bank of Korea revised the country’s on-quarter GDP growth in the April to June period 0.1 percentage points down to 1.0 percent.
Official spending is driving the economy. According to Finance Ministry data, government contribution to GDP growth was 1.2 percentage points, while the private sector’s was minus 0.2 percentage points.
Hong acknowledged the difficult situation, describing the latest government plan as “wringing out a dry towel” during a ministerial meeting.
“Amid increasing uncertainties and Japan’s economic retaliations in the second half of this year, there are increasing downward risks to our economy,” said Hong.
Headwinds stemming from global uncertainties keep building.
Seoul’s ongoing trade conflict with Tokyo took another turn on Wednesday, after the Ministry of Trade, Industry and Energy completed receiving opinions over its decision to downgrade Japan from its list of preferential trade partners.
The Japanese government submitted its position on the matter late Tuesday, describing Korea’s measure as an “arbitrary retaliation,” according to the Korean Trade Ministry. Japan removed Korea from its list of trusted export destinations last month.
Seoul shot back Wednesday, arguing that the change to Japan’s status is part of an effort to strengthen export controls.
Korea’s decision to remove Japan from its preferential trade list is expected to take effect later this month. The trade row is set to escalate as Seoul is currently preparing to file an official complaint with the World Trade Organization (WTO) over Japan’s measures.
Britain’s scheduled exit from the European Union without an agreement has also added on to mounting global uncertainties. The Federation of Korean Industries (FKI) expressed opposition to a “no-deal” Brexit on Wednesday through a joint statement with trade groups from seven other countries.
“A decision to leave the EU without a deal would create substantial uncertainty and disruption,” read the statement. “The UK walking away abruptly from treaty obligations with its largest trading partner also sends concerning signals to others considering bilateral agreements in the future.”
BY CHAE YUN-HWAN [firstname.lastname@example.org]
with the Korea JoongAng Daily
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