Korea Goes All-Out To Boost Economy; Exports, Investment and Consumption Remain Weak

We have seen what a debt-fuelled stimulus package has done to other countries' economies including the U.S. and Japan.  It hasn't worked.  Despite this fact, Korea seems to be poised to do the same.  We are amazed the so-called financial pudits argue Korea needs more stimulus measures.  The bond bubble may be the last bubble to blow.  We are stealing money from our next generation.

From Yonhap:

South Korea's sharp downgrade of its growth outlook for this year and the pursuit of an additional budget mirror the government's somber reality check on how serious the economic conditions for the country have become over the past months, experts said Thursday.

   The finance ministry lowered its growth outlook for this year from 3 percent to 2.3 percent. It also vowed to pursue an additional budget aimed at stimulating job creation and boosting the overall economic growth.

   The downgrade is seen as reflecting the current dire economic conditions confronting South Korea, Asia's fourth-largest economy.

   South Korea's gross domestic product grew less than 1 percent on-quarter for the seventh straight quarter, which is the longest streak of such low growth rates. The economy grew 2 percent in 2012, the slowest gain in three years.

   Exports, investment and consumption all remain weak.

   Exports dropped 8.6 percent on-year in February, a turnaround from the previous month's double-digit growth. In January, the country's industrial output also contracted for the first time in five months.

   Businesses remain reluctant to hire and invest amid prolonged uncertainty over market and policy directions of the government.

   Facility investment plunged 13.6 percent on-year in January, marking the ninth straight month of contractions. Retail sales also dropped 2 percent last month from a month earlier.

   The ministry makes no secret about its pessimistic views of the current situations, saying that there are few signs that investment and consumption will bounce back any time soon. It, instead, promised to make all-out efforts to turn the economy around.

   For starters, the ministry said that the government will front-load more than 60 percent of its existing fiscal spending plans during the first half. It will also unveil separate measures to stimulate investment and domestic consumption by the end of May.

   As for the prolonged slumping real estate market, the ministry said that it will announce a comprehensive set of measures to thaw the frozen transactions. This is in response to worries that the slumping real estate market is weighing on investment and consumption, and eventually hurting the overall economic growth.

   What is drawing more attention is that the government is seeking to draw up a supplementary budget, which would mark the first time in four years that it's come up with one. In 2009, it came up with 28.4 trillion won in extra spending in the middle of the global financial crisis.

   The government did not unveil the scale of the supplementary budget, saying that the final decision will be made in April.

   However, given that the country's tax revenue shortfall will reach 6 trillion won for this year, the amount may well go beyond 6 trillion won. Some expect that the government will come up with a budget exceeding 10 trillion won.

  Concerns are being raised that additional spending could hurt the country's fiscal health, which the government has maintained even in the face of the prolonged global financial crisis.

http://english.yonhapnews.co.kr/national/2013/03/28/97/0302000000AEN20130328006900320F.HTML