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Wednesday, October 22, 2008

S. Korea to prop up building sector

SEOUL: South Korea said it would spend about US$4bil to prop up its wilting construction industry, the second major package this week as it grapples with the impact of the global financial storm on its economy.

President Lee Myungbak said the credit crunch around the world made South Korea’s economic situation even more grave than the Asian financial crisis a decade ago, which pushed the country to the edge of default.

“The overall situation is more serious than the 1997 crisis. Back then it was an Asian crisis but today the entire world economy is at risk,” a presidential spokesman quoted Lee as saying during a cabinet meeting.

“It’s not like any recovery of our own means we will have escaped the effects of the (global) crisis,” Lee said.

The latest package, which follows Sunday’s US$130bil rescue for the credit-squeezed financial system, will allocate over five trillion won (US$3.8bil) to the construction sector whose problems the government fears could ricochet through the slowing economy.

“It is feared troubles in sectors of the real economy, such as the construction industry, could make things worse in the financial sector as well,” the government said in a statement.

The money will be used to buy unsold new homes and land from domestic builders who want to pay off debt.

By Reuters

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