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South Korea launches financial support program to boost investments and small businesses


South Korea launches financial support program

In a bid to stimulate economic growth and alleviate financial strains faced by businesses, South Korea has unveiled an ambitious financial support program totaling 75.9 trillion won ($56.97 billion).


This multifaceted initiative targets two crucial areas: incentivizing companies to increase investments in key sectors and providing relief for small businesses grappling with the adverse effects of high interest rates.


The cornerstone of this program is the allocation of 15 trillion won towards offering favorable policy loans through a state-run bank. These loans are strategically earmarked for industries deemed vital to South Korea's economic future, including semiconductor and battery manufacturing.


By providing accessible capital at advantageous rates, the government aims to encourage companies to expand their operations, innovate, and remain globally competitive in these critical sectors.



Furthermore, recognizing the pivotal role of small and medium-sized enterprises (SMEs) in driving economic growth and fostering innovation, the program dedicates 20 trillion won to support these businesses.


Commercial banks will play a key role in disbursing these funds, thereby ensuring that SMEs have access to the necessary capital to navigate challenges and seize opportunities in the marketplace.


Chairman Kim Joo-hyun underscored the importance of banks evolving their support mechanisms beyond traditional consumer financing, which has historically been skewed towards mortgage loans. By adopting a more inclusive approach that encompasses a diverse range of financial products and services tailored to the needs of businesses, banks can better facilitate growth and innovation across the economy.


The impetus behind this comprehensive financial support program is multifaceted. Firstly, South Korea's evolving trade relations with China and other global partners necessitate strategic investments and policy interventions to maintain competitiveness in the face of shifting geopolitical dynamics.



Secondly, rapid technological advancements in key industries such as semiconductor manufacturing and renewable energy production require sustained investment and support to harness their full potential and drive economic growth.


Additionally, the ongoing fragmentation of global supply chains, exacerbated by geopolitical tensions and the COVID-19 pandemic, poses new challenges for South Korean companies.


In response, regulatory reforms and targeted financial assistance are essential to help businesses adapt to changing market conditions, mitigate risks, and seize emerging opportunities.


One pressing concern addressed by the financial support program is the impact of high interest rates on business liquidity. To alleviate this burden, banks will offer a temporary reduction in interest rates for companies facing liquidity constraints in the current economic environment.



By providing relief in the form of lower borrowing costs, the government aims to ensure that businesses have the financial flexibility needed to weather short-term challenges and invest in long-term growth initiatives.


In summary, South Korea's financial support program represents a proactive and multifaceted approach to addressing the complex challenges facing its economy.


By incentivizing investment in key sectors, supporting SMEs, and providing targeted relief for businesses impacted by high interest rates, the government aims to foster a resilient and dynamic economic ecosystem capable of thriving in an increasingly uncertain global landscape.


15.02.2024



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