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South Korea's finance ministry said Tuesday that it earmarked 17.3 trillion won (15 billion U.S. dollars) in extra budget this year to boost the sluggish economy in the early period of new presidency under President Park Geun- hye.
The figure was the largest in the country's history except for those in 1998 and 2009 when the foreign exchange crisis and the global financial crisis dampened theNo. 4 economy of Asia, according to the Ministry of Strategy and Finance.
When including the state fund that can be expanded by the government without approval from lawmakers, the supplementary budget reached 19.3 trillion won.
Among the total, 7.3 trillion won will be spent in increasing fiscal expenditure such as rising investment by public corporations. The reading included 2 trillion won that will be used to expand the state-fund projects.
The remaining 12 trillion won will be spent in offsetting shortfall in tax revenues. The ministry estimated 6 trillion won in national tax revenue will reduce on the back of the downgraded growth outlook for 2013, with 6 trillion won in non-tax revenue estimated to fall amid delayed sales of stakes in the state-owned banks.
The finance ministry slashed its 2013 growth outlook from 3 percent to 2.3 percent in late March, heralding an extraordinarily huge amount of supplementary budget in the early period of the new administration.
Despite the government's dimmer outlook, the central bank froze its benchmark interest rate at 2.75 percent at the April rate- setting meeting. The Bank of Korea (BOK) cut its growth outlook from 2.8 percent to 2.6 percent, higher than the figure by the finance ministry.
Regarding the different outlook between the central bank and the finance ministry, BOK Governor Kim Choong-soo said that it may stem from the reflection of the extra budget in the BOK's outlook, while the ministry was estimated to have excluded the supplementary budget from its forecast.
