South Korea to pump $11bn into economy

South Korea plans to pump an extra $11 billion into its economy next year to help fend off the impact of the global financial storm, which is beginning to hit exports – the country's economic lifeblood.

Finance Minister Kang Man-soo said yesterday economic growth could fall to its lowest in more than a decade without the fiscal stimulus, which will need approval by parliament where the pro-government party has a large majority.

His comments came just after the government gave stark proof of the damage from the global economic downturn, announcing that export growth in October had fallen to a 13-month low, worse than analysts had expected.

"If the current situation continues, the economy is expected to grow by around three per cent next year. If the global economy shrinks further, it may be difficult to achieve three per cent growth," Kang said.

Financial markets have slumped in the face of the global downturn, with both the won and the main Kospi share index losing around a third of their value since the start of the year in some of the most volatile trading seen since the Asian financial crisis a decade ago which ravaged its economy.

The won had another see-saw day, opening almost two per cent lower, then rising, helped by the gains in share prices. It was quoted at 1,285.90/9.10 to the dollar.

The package includes 11 trillion won in additional government spending next year and 3 trillion in tax cuts. Much of the extra spending is aimed at the real estate and construction industries.

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