Finance Minister Choi Sang-mok, who also serves as the deputy prime minister for economic affairs, speaks during a meeting with officials of financial institutions in Seoul, Jan. 3. Yonhap

The government will push to provide greater tax incentives for corporate investment in research and development (R&D) projects and record financing for exporters this year as part of efforts to boost exports and domestic demand for an economic recovery, the finance ministry said Thursday.

They are part of Korea's key economic policy measures for 2024, which also include ways to curb inflation, manage risks in the financial and other vulnerable sectors, and to secure longer-term growth momentum through innovation and deregulation in the face of demographic and climate challenges, according to the Ministry of Economy and Finance.

"Under the goal of achieving an active economy for the people, the government set four pillars of reviving the economic livelihood of the people, managing potential risks, activating a dynamic economy and devising measures for future generations this year," Finance Minister Choi Sang-mok said.

The Korean economy is projected to grow 2.2 percent in 2024 on rising exports, accelerating from last year's expansion of 1.4 percent.

Exports are expected to gain 8.5 percent this year, rebounding from last year's 7.4 percent decline.

To prop up exporters, the government vowed record trade financing of 355 trillion won ($271.26 billion) this year and plans to introduce a trade settlement mechanism using the Korean won, rather than U.S. dollars, for the first time ever.

Despite a recovery of exports, domestic consumption and investment are expected to remain weak amid high inflation and interest rates, according to the ministry.

First Vice Minister of Strategy and Finance Kim Byung-hwan briefs on 2024 economy policies at Government Complex in Sejong, Jan. 2. Yonhap

In an effort to boost investment, the government decided to extend the temporary tax credit, expired at the end of 2023, by one year, to offer an additional tax deduction for companies making greater facility investments compared with the previous year.

It also plans to temporarily raise the tax deduction rate by 10 percent for firms spending more on R&D projects. It will be the first time for the government to provide greater tax cuts for increasing corporate R&D investment.

A total of 52 trillion won of financing, the largest-ever amount, will be available for facility investment in semiconductor, battery, robot and other advanced sectors, as well as for corporate investment in green growth.

Korea aims to attract a record amount of foreign investment, or $35 billion, in 2024, and the government pledged to quadruple budgets for incentives for foreign firms to 200 billion won and extend various administrative support.

The government seeks to bring inflation down below 3 percent within the first half, with its annual target being set at 2.6 percent.

The government plans to freeze electricity rates and other utility costs in the first half, and adjust them later given global oil prices and other factors.

A total of 10.8 trillion won will be set aside this year for policy responses to curb prices, such as energy voucher programs and discount coupons for farm produce.

The government plans to either reduce or eliminate duties on 21 kinds of fruit, the largest ever, and import 300,000 tons at lower prices in the first half, the ministry said.

Gyeongbok Palace in central Seoul is crowded with visitors, Jan. 1. Yonhap

As a way of stimulating domestic consumption, the government plans to offer a greater tax deduction for credit card use, and launch various campaigns and promotional events to vitalize domestic tourism.

Small merchants with fewer than 30 million won of annual sales will be able to enjoy the reduction in power rates, and the 2.3 trillion-won interest refund program will be implemented this year, the ministry said.

The government also set a goal of attracting 20 million foreign visitors in 2024.

Group tourists from China, Vietnam, the Philippines, Indonesia, India and Cambodia will be exempt from paying visa application fees this year.

Tax refunds for foreign tourists on accommodation fees in Korea will be expanded, and the government will kick off the 40-day "Duty-Free Festa" in May, which will offer up to 30 percent off for foreign visitors.

The government will expand liquidity supply programs from the current 85 trillion won in response to growing concerns over the real estate project financing market after Taeyoung Engineering & Construction Co. applied for a debt-restructuring program last month.

The state-run Korea Land & Housing will take over construction projects in case its operators suffer a temporary liquidity crunch while the projects are found to be feasible and profitable.

In the wake of rising household debt, the government pledged to reduce the debt-to-gross domestic product ratio to 100 percent by 2027 from around 101.7 percent last year.

The government also presented a set of measures to ensure stable supply chains of major industry items, such as tax incentives for companies' overseas resource development and subsidies for the development of key homegrown technologies, materials and parts.

With a longer-term perspective, Korea seeks to add "dynamics" to the economy by easing regulations, backing smaller businesses and venture firms, and spending more on global R&D projects to spur innovation.

Policy financing of 150 trillion won will be provided over the next three years to nurture advanced industries of semiconductors, rechargeable batteries, bio, future mobility and hydrogen.

The government reaffirmed its commitment to fiscal soundness to ease burdens on future generations, and vowed to reform national pension and health insurance programs.

To cope with growing labor shortages, it plans to increase the number of migrant workers from last year's 172,000 to over 260,000 this year.

Various tax incentives will be introduced for those who have a second home in regions experiencing population decline as part of efforts to revitalize regional economies.

"The government will adjust budget priorities among programs meant to address falling birthrates and population aging to maximize policy effects," Yoon In-dae, chief of the ministry's economic policy department, said.

Korea has experienced rapid aging and it is expected to become a super-aged society in 2025, where the proportion of those aged 65 and older hits 20 percent of the population, amid a constant fall in the ultra-low birthrate. (Yonhap)