South Korea Proposes $17.2 Billion Stimulus to Boost Economy

Another country joins the bandwagon, as South Korea announces a $17.2 billion stimulus plan. South Korea is facing results of the yen’s devaluation, but is also going though domestic issues as their economy slows to its lowest rate of growth since 2009.

In relation to all of the attention of Japan’s aggressive monetary policy, South Korea’s won has had the inverse direction, strengthening in recent years rather than weakening. Thus,  the effect on exporters like Samsung and Hyundai are felt twice, and it is putting a lot of downward pressure on spending and the economy overall.

The yen’s drop in value has been cited several time when officials announced lowered estimates for growth in the coming years, but there is optimism now due to the government’s plans for stimulus. “It’s the government’s biggest stimulus package since interventions to lift South Korea out of financial crises in 1998 and 2009, according to the Finance Ministry.”

I do not think that the currency war is really being played out yet, but I see South Korea’s actions as a slight warning of what could potentially happen. I feel that, given South Korea’s close proximity to Japan and sluggish economy, the stimulus is well placed. The country still has to ensure that they are growing at a decent pace as well, despite what other countries may say in response.

Source:

http://www.bloomberg.com/news/2013-04-16/south-korea-proposes-17-2-billion-stimulus-to-boost-economy.html

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