South Korea unveiled a $5.2 billion stimulus package on Monday, including tax breaks worth $2 billion, as the government tries to shore up Asia’s fourth-largest economy in the face of Europe’s protracted debt crisis.
The steps would save taxpayers some 2.3 trillion won ($2.0 billion) in personal income tax, home transaction tax and domestic sales tax on automobiles and large electronics appliances, the finance ministry said in a statement.
“The fiscal crisis in Europe is continuing for a longer period than expected and the simultaneous slump in the advanced and emerging economies is continuing,” Finance Minister Bahk Jae-wan said at a policy meeting.
Some economists were not impressed by the package, the bulk of which was complicated and did not appear to involve new spending. They said the moves would have only a limited effect on boosting spending by consumers, who remain worried about the highly uncertain future.
The ministry said the package, which also includes a plan to make sure provincial governments spend their full budget allocations, would amount to 4.6 trillion won this year and 1.3 trillion won for next year, worth about $5.2 billion in total.
The measures were a follow-up to a $7 billion package in late June. Together, the stimulus packages are equal to about 1 percent of gross domestic product.
A ministry official said the two sets of measures would have the effect of increasing this year’s economic growth by 0.19 percentage points, but an increasing number of experts have been cutting the country’s economic growth forecast.
NOT GOOD when Asia is starting a bailout!