Gov`t to expand spending in Q2 to shore up disaster-hit economy

In a bid to prevent the economy from falling into a slump anew due to the aftereffect of the Sewol tragedy, the government has decided to spend extra 7.8 trillion won (7.6 billion U.S. dollars) in state finances in the second quarter. The government has also decided to make low-interest loans worth 15 billion won (14.6 million dollars) at a 2 percent rate from a state fund to smaller tourism, transportation and lodging businesses that are struggling due to mass cancellations of reservations in the wake of the ferry disaster.

On Friday, the government held an emergency meeting on people’s livelihoods chaired by President Park Geun-hye, and approved these and other measures to prop up economy and to compensate damage in the aftermath of the accident.

For starters, the government plans to heavily inject government finances through June to revive consumer sentiment. In the second quarter of the year, the government has increased the spending by 6 trillion won (5.85 billion dollars) to 86.8 trillion won (84.6 billion dollars) from the original expenditure. Metropolitan and provincial governments are also set to increase their spending by 1.8 trillion won (1.75 billion dollars) from 26.9 trillion won (26.2 billion dollars) to 28.7 trillion won (28 billion dollars). The Strategy and Finance Ministry expects these measures will help elevate second quarter’s economic growth rate by 0.2 percentage points from the previous quarter.

The government has also devised measures to support companies, smaller businesses and fishermen that have suffered operational losses due to the ferry disaster. Tourism, transportation and lodging businesses are entitled to low-interest loans worth 15 billion won (14.6 million dollars) at 2.25 percent from the state tourism promotion and development fund.

To all fishermen and small businesses in the disaster areas of Jindo County, South Jeolla Province, and Ansan City, Gyeonggi Province, the government has decided to offer cross-the-board three-month extension of deadline for additional tax payment.

“To ensure that recovering economy will not suffer a setback, the government should make every effort to preemptively shore up the economy,” President Park said. “If the government fails to preemptively cope with, consumption will freeze and signs of economic recovery that have been created through painstaking efforts are feared to dwindle.”