South Korea unveils $5.2bn stimulus South Korea is to spend $5.2bn on fiscal stimulus measures, as it seeks to boost a flagging economy hit by slowing global consumption. In a statement published on Monday, the finance ministry announced steps including a temporary easing of taxes on consumption and property transactions, and an increase in state credit for small businesses. The measures, effective from this month, will cost $4.07bn this year and $1.15bn in 2013. Bahk Jae-wan, the finance minister, had previously indicated a reluctance to conduct large-scale stimulus, citing the need to preserve ammunition in case of a more serious deterioration in the economy. Like a $7.5bn package announced in June, the stimulus will not involve an expansion of this year's government budget, and it is far smaller than the March 2009 stimulus of $21.6bn. A senior government official said it was expected to boost gross domestic product by just 0.06 per cent this year and 0.1 per cent next year. The announcement failed to boost equities in Seoul: the Kospi index closed 0.25 per cent lower. However, the stimulus is larger than economists had expected, reflecting policy makers" concern at a string of data indicating ebbing momentum in the economy. Exports - the main driver of South Korea's economy - fell 6.2 per cent last month, while growth in industrial production has turned negative and confidence is declining among both consumers and businesses. In July the Bank of Korea reduced its economic growth forecast for this year by 50 basis points to 3 per cent, but some economists say the real figure will be lower, after expansion of just 2.3 per cent in the second quarter of this year. The stimulus comes ahead of a presidential election in December that is likely to be closely contested, with popular discontent about the slowing economy a key theme. The constitution prevents Lee Myung-bak, the president, from running for a second term, but his unpopularity is a potential liability for Park Geun-hye, the presidential candidate of the ruling Saenuri party. Seok Yun, head of Korea research at Samsung Securities, said that South Korea's relatively small pile of government debt - at 34 per cent of GDP - gave it ample scope for a larger stimulus next year. "They could have been more aggressive [on this occasion] but we're going into an election in the fourth quarter . . . politically, creating a big deficit at this time is not easy," Mr Yun said. The important message is that this is a beginning - if the economy deteriorates, they can come up with something more. Economists expect the Bank of Korea to follow on Thursday by cutting the base interest rate by 25 basis points to 2.75 per cent. This would follow a cut of the same size in July. Additional reporting by Laeticia Ock in Seoul