How best to prop up the companies that power South Korea’s export-driven economy as the rest of the world slows? The government’s previous answer, the so-called “one-shot” bill, aims to help the worst-affected industries to restructure by offering tax breaks for firms that sell subsidiaries and by reducing the red tape around mergers. Parliament approved it in February; it will come into effect in August. But Park Geun-hye, South Korea’s president, thinks more is needed. On June 28th she proposed a stimulus of 20 trillion won ($17 billion).
South Korea’s exports have fallen every month year-on-year since January 2015. In early June the central bank trimmed its benchmark interest rate by 0.25 percentage points, taking it to an all-time low of 1.25%. Nonetheless the government this week revised down its forecast of GDP growth this year from 3.1%, which it predicted in December, to 2.8%. Ms Park said that the economic situation inside and outside the country was “more serious than ever”.
Britain’s recent decision to leave the European Union, South Korea’s fourth-biggest market for exports, has rattled it. But the economy, Asia’s fourth-biggest, has been struggling for some time. Growth has slowed from an average of 4.4% between 2001 and 2011 to 2.8% since then. The slowdown in China, the destination for a quarter of South Korea’s exports, has been especially painful. Low oil prices, meanwhile, have hammered shipbuilders, which build lots of rigs and other equipment for the offshore oil industry.
This week the government said 60,000 people might lose their jobs in the shipbuilding sector, which employs 200,000 in total and accounts for 7.6% of South Korean exports. Earlier in June Ms Park had urged “bone-crushing” efforts to overhaul the industry and prop up its three biggest yards—Hyundai Heavy Industries, Daewoo Shipbuilding & Marine Engineering and Samsung Heavy Industries (which last year reported combined annual losses of 6.4 trillion won)—promising to pump 11 trillion won into state-run lenders saddled with loans to them.