Business News

Jul 24, 4:10 AM EDT

South Korea unveils stimulus after ferry sinking


AP Photo
AP Photo/Lee Jin-man
World Video

Buy AP Photo Reprints
Multimedia
Swift negotiations free U.S. journalists
Timeline of U.S.-North Korea relations
Timeline of North Korea's nuclear and missile programs
Depth of Field: North Korea
A look at Kim Jong Il
Truth emerges about Kim Soo-im
Commission: U.S. military killed Korean refugees
South Koreans Protest U.S. Beef Accord
S. Korea Women Keep Diving Tradition Alive
Bittersweet Homecoming: Koreans Return Home After 68 Years in Russia
Latest News
2 Americans detained in North Korea seek US help

AP Photos: Beating heat on Pyongyang's Moran Hill

South Korean ruling party wins by-elections

South Korea says North Korea fires 4 projectiles

Teen survivors haunted by S. Korean ferry sinking

Multimedia
A district summary of the Beige Book
Measuring economic stress by county nationwide
Mall malaise: shoppers browse, but don't buy
Unemployment by the numbers
Family struggles with father's unemployment
Saying an affordable goodbye
Hard times hit small car dealer
Latest Economic News
US job growth eases but tops 200K for a 6th month

Autos and construction fuel US job growth

US job gains are bypassing many 25-to-34 year-olds

Obama: Economy stronger, Congress could do more

US manufacturing expands again in July

How the Dow Jones industrial average did Thursday

NY Fed: Puerto Rico should seek economic reforms

As US job market strengthens, many don't feel it

Eurozone inflation down again but ECB seen on hold

Russia tensions hurting European companies

Interactives
Greece's Debt Threatens to Spread
State budget
gaps map
Auto industry problems trickle down, punish Tennessee county
Women give old Derby hats a makeover in tough economy
S.C. town deals with highest unemployment in South
How mortgages were bundled and sold as securities
Tracking the $700 billion financial bailout
Tracking the year's job losses
State-by-state foreclosures since 2007
Credit crisis explained
Presidents and their economic legacies
Lexicon of the financial crisis
Americans' addiction to debt

SEOUL, South Korea (AP) -- South Korea's government announced a $40 billion stimulus plan Thursday after the shock of a deadly ferry sinking slowed economic growth to the lowest level in three quarters.

The finance ministry said government spending would increase by 11.7 trillion won ($11.4 billion). Another 29 trillion won would be available to small- and medium-sized companies through loans and other financial support.

To stimulate the real estate market, the government will ease mortgage rules that limit household loans for home buyers.

In announcing the stimulus, the ministry lowered its forecast for South Korea's economic growth this year to 3.7 percent from 3.9 percent.

A slump in domestic spending crippled growth during the first half while there are uncertainties in the global economy that could slow exports during the second half, it said in a statement.

Earlier Thursday, the Bank of Korea said Asia's fourth-largest economy grew 3.6 percent from a year earlier in the April-June quarter after expanding 3.9 percent in the first quarter. That was the slowest growth in three quarters.

From the previous quarter, the economy expanded 0.6 percent, the slowest pace in more than a year.

The central bank said even though exports continued solid growth, consumer spending turned negative. Consumer spending fell 0.3 percent, the worst since the third quarter of 2011.

Earlier this month, the bank reduced its forecast for economic growth this year to 3.8 percent from 4.0 percent, citing a deadly ferry sinking in the spring that dented consumption.

The April 16 ferry disaster that killed 294 people and left 10 missing shocked South Koreans and left the country in grief for weeks. Massive cancellations of trips followed the tragedy, hitting food, service and entertainment sectors that serve tourists.

The latest growth data likely boost expectation that the Bank of Korea will cut its key interest rate as soon as next month. The bank has kept its benchmark interest rate at 2.5 percent since May, 2013. One policymaker disagreed with the rate freeze during the bank's July meeting.

© 2014 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed. Learn more about our Privacy Policy and Terms of Use.