South Korea Ruling Party Head Resolved to `Resuscitate' Economy

By Kim Kyoungwha

Nov. 5 (Bloomberg) -- South Korea's government is determined to ``resuscitate'' the economy by frontloading stimulus spending in the first few months of 2009, said ruling Grand National Party Chairman Park Hee Tae.

Policy makers cut interest rates, guaranteed bank debt and made more cash available to small businesses as the credit crunch aggravates a shortage of funds in South Korea. The government this week unveiled a 14 trillion won ($11 billion) stimulus plan of spending and tax breaks for 2009 to prevent the economy from slipping into its first recession in a decade.

``Tsunami-like turmoil from the outside world is having a negative influence on our economy,'' Park, 70, said in an interview in Seoul yesterday. ``We are firmly determined to resuscitate the economy through aggressive fiscal spending.''

The government forecasts the 2009 fiscal deficit will be 21.8 trillion won, or 2.1 percent of gross domestic product, more than double its previous estimate of 10.4 trillion won.

``The government will frontload spending early next year and is ready to accept deficit,'' Park said.

The economy expanded 0.6 percent last quarter from the previous three months, the slowest rate in four years, as exports fell and consumer spending stagnated. Jobs growth slowed to the weakest pace since 2005 in September as manufacturers, builders and retailers cut workers.

``Officials are working on comprehensive economic- development schemes aiming at the revival of the real economy,'' Park said. The plans, including development of provincial regions, will be announced early next year, he said.

`Too Complacent'

Park cautioned against being ``too complacent'' about a recent improvement in South Korea's currency and equities.

``Stability in the international financial markets is needed to regain full confidence,'' he said.

The won has risen 13 percent against the dollar in the past week, rebounding from its lowest level in 10 years, as the Federal Reserve agreed to provide the Bank of Korea with $30 billion. The benchmark Kospi stock index last week posted its biggest gain in at least two decades.

Still, a trade report on Nov. 3 underlined the widening fallout from the global slowdown. Exports, the main engine of South Korea's growth, rose by the least in 13 months in October because shipments to China fell for the first time since 2002.

To contact the reporter on this story: Kim Kyoungwha in Beijing at kkim19@bloomberg.net.