A $40 billion stimulus package for economic expansion was announced on Thursday in South Korea, Seoul. The government also said that it would make the mortgage rule more agreeable and provide tax benefits to businesses facing problems to accelerate the growth of the economy.
The Finance Ministry said that it now expects a 3.7% growth this year which is lower than the earlier projected growth which was about 4.1%. The expansion of the economy last year was 3 % and the expected growth by the ministry in 2015 is 4%.
The Ministry suggests that the reason for this slow growth is slow expansion of the global economy which curtails the demand for South Korean exports and the weak domestic demand followed by the sinking of the ferry in April.
The government suggested a stimulus plan to aid economic growth which is worth about 41 trillion ($40 billion) which includes 11.7 trillion won in expanded fiscal spending and 29 trillion won in extra financing support.
Companies will be given tax benefits, which in turn -the government hopes – will trigger better household incomes and purchasing power. How these tax benefits will be allotted and the specific tax terms are due next month.
The forecast for consumer prices was also realistically cut by the government. It now expects them to rise 1.8% in 2014 while the December forecast suggested 2.3%. Also, the Bank of Korea has managed to keep its interest rate steady at 2.5% for 14 months now but experts expect a cut in the rate to help growth. The bank even cut its own 2014 growth forecasts to 3.8% from an earlier projection of 4%.