The South Korean government plans to inject an additional 5 trillion won ($4.7 billion) worth of policy funds this year to jumpstart the slowing economic recovery, the Finance Ministry said Wednesday.

The 5 trillion won is in addition to the 26 trillion won that the government earlier set aside for this year as part of a stimulus package worth some 41 trillion won announced by Finance Minister Choi Kyung-hwan following his inauguration in July.

The ministry said Seoul also planned to allow more duty-free shops to open in Seoul and other major cities to help bolster consumption by foreign travelers, including the growing number of Chinese tourists.

However, it did not elaborate on how and when shops will be allowed to open. 

Regarding an almost two-decade old limit on locals from using the duty-free shops on the island of Jeju, the government is mulling lifting the regulation to stimulate consumption.

These and other measures are a part of government efforts to boost domestic demand and with it the economy. They come amid growing concerns that the weakening yen could hurt the price competitiveness of small and medium-sized exporting companies.

Some of the nation’s largest companies such as Samsung Electronics and Hyundai Motor ― cited as the pillars of the Korean economy ― have been suffering from the impact of the strengthening Korean currency.

To help companies exposed to the currency risks, the government plans to ease the currency insurance burden for companies selling goods to Japan.

The government also seeks to provide tax benefits, including tariff exemptions, to companies purchasing facilities by capitalizing on the falling value of the Japanese yen, the ministry said.

On Tuesday, the Bank of Korea said Korea was likely to continue to recover modestly, backed by a global economic recovery and ongoing economic policies.

In a report for the annual parliamentary unit, the central bank noted signs of recovery in the local economy such as solid exports and a modest improvement in consumption.

Private spending rose 2.7 percent on-month in August and 0.3 percent in July, turning around from a 0.3 percent fall in the second quarter.

The bank, however, said that facility improvement remained sluggish, dropping 10.6 percent in August from the previous month.

By Shin Ji-hye and news reports
(shinjh@heraldcorp.com)