S Korea proposes $8bn extra budget to fight air pollution

25 April, 2019 12:00 AM printer

SEJONG: South Korea on Wednesday unveiled a proposed 6.7 trillion won (S$8 billion) supplementary budget the government says is needed to tackle unprecedented air pollution levels and boost exports bruised by weak demand.

The package includes 2.2 trillion won to battle pollution, including subsidies for replacing old diesel-powered cars, buying air purifiers and encouraging use of renewable energy technologies, report agencies.

Another 4.5 trillion won would be increasing export credit financing and creating jobs.

The extra budget is to "resolve a national predicament caused by fine dust" and to support the economy, the finance ministry said.

Finance Minister Hong Nam Ki said it would contribute to helping lift growth in Asia's fourth-largest economy by 0.1 percentage point this year and add at least 73,000 jobs.

But economists saw limited stimulative effect.

"It is better than doing nothing to lift the growth in the second half, but both size-wise and content-wise, it won't be a catalyst for economic recovery," said Lee Sang Jae, chief economist at Eugene Investment.

Markets shrugged off the government's stimulus proposal.

In March, parliament approved a bill designating the air pollution problem a "social disaster", paving the way for President Moon Jae In's government to draft a fiscal stimulus programme to combat it.

Also in March, exports contracted for a fourth month in a row.

Last week, the central bank cut its 2019 growth forecast to a seven-year low of 2.5 per cent, underlining worries that weak external demand and trade frictions could stunt economic recovery.

Loss of jobs is also a worry. South Korea's unemployment rate jumped to a nine-year high in January, hurt by the government-led hikes in minimum wages and growth concerns among businesses.

Employment conditions improved slightly in March, but the situation remains difficult, the finance ministry has said.