The South Korean government said it will spend an extra 10 trillion won ($8.9 billion) in the fourth quarter this year to prop up the slowing growth rate, as exports and manufacturing are hit by a series of strikes at automakers and corporate restructuring.

Finance Minister Yoo Il-ho said in an economy-related ministers meeting that the local economy’s fourth quarter will face mixed elements.


“Spending the scheduled extra budget in the fourth quarter and the consumption event Korea Sale Festa will yield positive results. But the enforcement of the anti-graft law, ensuing sluggish domestic demand and aftershocks from corporate restructuring and a possible US rate hike, will limit the economic recovery,” Yoo told ministers in Seoul.

The central government, provincial governments and state-run companies will spend a combined 10 trillion won, on top of 16.6 trillion won that has not been executed from the scheduled spending this year, he said.

Yoo also said that the government will support disaster management and safety-related subsidies and special grants to those hit by Typhoon Chaba that struck the southern region this week.

Seoul’s move came as economists are drawing a gloomier picture for Asia’s fourth-largest economy with lower growth rate forecasts.

LG Economic Research Institute said the GDP growth rate will fall from 3.3 percent in 2015 to 2.5 percent this year, and further down to 2.2 percent in 2017, citing the ebbing effects of construction-led growth.

The Finance Ministry set its growth target for 2016 at 2.8 percent.

Hong Jun-pyo, a research fellow at Hyundai Research Institute, said spending an extra 10 trillion won might raise Korea’s growth rate by about 0.1 percentage point.

“To avoid a long-term recession, the Korean government should help industries continue restructuring as scheduled and enlarge investment in R&D to improve industrial competitiveness,” Hong said.

By Kim Yoon-mi (yoonmi@heraldcorp.com)