“South Korea announced it will unveil a stimulus package in April to spur the property market and revive the economy after cutting its growth forecast for the second time in four months.
A supplementary budget and details of the measures to encourage property sales will be released over time, the Finance Ministry said in a statement in Sejong today. The economy will expand 2.3 percent this year, down from a 3 percent growth forecast made in December, it said.
The new forecast is more pessimistic than the central bank’s outlook for 2.8 percent growth and compounds concern that expansion in Asia’s fourth-largest economy will stall after slowing to the weakest in three years. Facing a stagnant property market and weaker yen, the Bank of Korea may come under pressure to lower the benchmark interest rate next month.
“This is a major cut, and marks a shift from a government that prioritized fiscal soundness to one that takes a more realistic view of the economy that needs a policy boost,” Lee Chul Hee, a Seoul-based economist at Tongyang Securities Inc. (003470), said by phone today. “The Bank of Korea will need to make a strong case that the economic recovery is on track not to make the interest-rate cut in April.”
Today’s revision was the second time the government has lowered its growth forecast since President Park Geun Hye was elected in December. The new forecast doesn’t factor in the coming stimulus package, Choi Sang Mok, a director general at the Finance Ministry, told reporters today.
