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SEOUL, March 23 (Reuters) - South Korea's government and ruling party have agreed new spending plans worth around 18 trillion won ($13 billion) out of a 29 trillion extra budget to revive the economy, the ruling party said on Monday.
The additional spending is expected to help bolster economic growth by 1.5 percentage points, or 2 percentage points if it was accompanied by more private sector investment and deregulations, the Grand National Party said in a statement.
"The party and the government reached an agreement on a supplementary budget of around 29 trillion won. We decided to set aside for some 18 trillion won for fresh spending and 11 trillion won for tax shortfalls," GNP spokesman Yoon Sang-hyun said.
The additional spending, which is equivalent to about 2 percent of the country's annual gross domestic product, came as Asia's fourth-largest economy headed for its first recession in 11 years.
The finance ministry expects the country's economy to shrink around 2 percent this year, while 200,000 jobs will be lost.
The government plans to spend 4 trillion-4.5 trillion won to help people with low incomes, 3 trillion-3.5 trillion won to recover job markets and 4.5 trillion-5.0 trillion to support small exporters and the self-employed, according to th GNP.
It will inject 2.5 trillion-3.0 trillion won to revive provincial economies and invest 2.0 trillion-2.5 trillion in research and development, as well as education and river development.
The government plans to submit the budget bill to parliament for approval by the end of this month. The party did not say how the new expenditure would be funded.
Earlier this month, a senior party official said the country would probably sell 17 trillion to 19 trillion won worth of treasury bonds domestically to fund the supplementary budget.
Concerns about a big amount of government bond offerings to fund the supplementary budget have dented the market since late January.
South Korea's June treasury bond futures
Analysts have said the central bank was unlikely to underwrite treasury bonds but might buy some in the secondary market to support the budget and to keep debt rates from shooting up.
Meanwhile, the GNP said the party and the government shared a view that the country was expected to meet a current account surplus forecast of $13 billion this year. ($1=1398.0 Won) (Reporting by Cheon Jong-woo; Editing by Jan Dahinten)