South Korean government has proposed to create supplementary budget worth 10 trillion won ($8.5 billion) and dig into all public coffers to squeeze out another 10 trillion to add fiscal spending of 20 trillion won in the second half as global volatility from the British vote to leave the European Union increased uncertainty to the economy in lethargic movement.

The government announced an expansionary plan in its outline on economic policy direction for the second half after a cabinet meeting chaired by President Park Geun-hye on Tuesday.

The supplementary budget will be financed from 1.2 trillion won surplus from last year’s budgetary balance and expected excess in this year’s tax revenue instead of issues in new debt. It will separately arrange 10 trillion won or more through increased state and policy funds, and investment by public institutions. The additional 20 trillion won fiscal input could contribute up to 0.3 percentage point in this year’s growth rate.

To address signs of overheat in new apartment market around the capital, the government plans to toughen loan regulations for new apartment supplies. State guarantees for down payment will be limited to two homes per person and each guarantee capped to 600 million won for apartments around the capital and 300 million won for other areas. Home with value exceeding 900 million won’t get any state payment backing. The state agency currently extends guarantees on all loans for down payment.

To help spur domestic demand through a promotion of green policy, the government will offer temporary tax benefit for any new car purchase to replace diesel cars that are 10 years or older until the end of the year by lowering the individual sales tax rate to 1.5 percent from 5.0 percent.

Tax incentives also would be given out to purchase of an energy-efficient refrigerator, TV, and other home appliance for three months from July.

By Kim Gyu-sik

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