President Park Geun-hye called on the government and corporations to take preemptive measures to prevent an economic slowdown in the wake of the deadly ferry disaster that has been keeping consumption and investment at low levels.
“To ensure that the economy’s recovery trend is not shaken, there must be no carelessness in efforts to preemptively supplement the economy,” she said on Friday during an emergency meeting with economic ministers and business representatives at the presidential office of Cheong Wa Dae.
“Domestic demand, such as private consumption and facility investment, is not recovering stably, and due to the recent Sewol accident, consumer confidence is showing signs of contraction.”
The Sewol sank off the southwestern island of Jindo on April 16, leaving more than 300 people dead or missing. Many across the nation have been in mourning since then, causing consumer spending to slow in tourism, hospitality and other sectors.
“The confidence of economic players is important, and if these signs are not dealt with preemptively, consumer confidence will freeze up,” Park said.
The South Korean economy appeared to be on the path of recovery after growing 3.9 percent in the first quarter from a year earlier.
Meanwhile, to further cope with the sluggish domestic demand, the government said it would increase its first-half budget spending ratio from the previously-set 55 percent to 57 percent, which translates into 7.8 trillion won more in fiscal spending until the end of June.
The government expects that the 2 percentage point increase will result in a 0.2 percentage point hike in the country’s gross domestic product during the second quarter of this year compared with three months earlier.
Seoul also plans to expand its low-interest loans and loan guarantees for small and medium-sized companies whose businesses were seriously affected by the ferry incident, according to the Finance Ministry.
Up to 15 billion won in low-interest loans through the government’s tourism development fund to small companies will be granted, the ministry said.
Through the state-run Industrial Bank of Korea, the government also plans to extend the maturity of existing loans made to small companies and make a maximum of 30 billion won in low-interest loans available to them. A company can borrow up to 300 million won through the program.
“Our economy is keeping its slow but steady recovery but the private sector is not strong enough and external risks are still lingering at home and abroad,” said Finance Minister Hyun Oh-seok.
“A slump in consumption following the Sewol incident and its impact on the tourism, transportation and lodging sectors could dampen the hard-lit flames of the economic recovery.”
“The government will intensify its efforts to prevent weak economic sentiment from hurting the recovery of the economy in people’s daily lives through pre-emptive and active responses, while keeping up its recovery and rescue efforts,” he added.
By Bae Hyun-jung and reports