The Korean government today announced plans for a fiscal stimulus package worth about 20trn won (equivalent to 1.3% of GDP) in response to growing headwinds facing the economy. The decision follows the Bank of Korea’s move to cut interest rates to a new record low earlier this month. Details of the stimulus package are still thin on the ground. Although reports suggest the stimulus will consist of an extra 10trn won in government spending and a further 10trn won in investments from state-owned enterprises (SOEs), it is unclear how much of this is new money and whether the investment from SOEs will even materialise. Given this, we doubt the boost to growth will be anywhere near as big as the headline figure indicates. The government today also cut its growth forecast for this year from 3.1% to 2.8%. With external uncertainties rising following the UK’s vote to leave the EU and the recovery in China proving weaker-than expected, the risks to our 3.0% growth forecast for 2016 are firmly to the downside. We will be reassessing our forecasts in the next Emerging Asia Outlook, to be published next month.
Become a client to read more
This is premium content that requires an active Capital Economics subscription to view.
Already have an account?
You may already have access to this premium content as part of a paid subscription.
Sign in to read the content in full or get details of how you can access it
Register for free
Sign up for a free account to gain:
- Unlock additional content
- Register for Capital Economics events
- Receive email updates and economist-curated newsletters
- Request a free trial of our services