Nov. 3 (Bloomberg) -- South Korea plans a 14 trillion won ($10.8 billion) boost to the economy next year as the nation tackles the biggest crisis since it needed an International Monetary Fund bailout a decade ago.

The package includes spending an extra 4.6 trillion won on regional infrastructure and providing 3 trillion won in tax benefits, mainly extending tax breaks on investment in factories, Finance Minister Kang Man Soo told reporters today in Gwacheon. Relief measures announced this year now total 33 trillion won, according to the finance ministry.

The currency and stocks rose after the government said the measures will add 1 percentage point to economic growth next year and create an extra 200,000 jobs. South Korea cut interest rates by a record last week and the Federal Reserve agreed to provide the central bank with $30 billion in U.S. currency after local financial markets tumbled.

``Korea is taking appropriate steps with this fiscal and monetary stimulus as policy makers around the world focus on growth,'' said David Cohen, director of Asian economic forecasting at Action Economics in Singapore. ``A further 25 basis interest-rate cut is most likely this week.''

Japan announced a $51 billion stimulus package last week for Asia's largest economy and Germany plans to provide a 50 billion euro ($64.2 billion) boost to Europe's biggest economy.

Exports Weaken

An overseas trade report today highlights the risks to South Korea from the global financial turmoil. Exports, the main engine of growth, rose by the least in 13 months in October because shipments to China fell for the first time since 2002.

The government will provide 1.3 trillion won to the state- run financial institutions, including Korea Development Bank, so the banks can lend more to smaller companies and exporters.

It will extend tax breaks for companies investing in factories by one year, out until the end of 2009.

South Korea also said it will spend an extra 1.3 trillion, mainly on medical services for low-income earners and creating jobs for the elderly and internships for younger people.

The won jumped 2.3 percent to 1,262 against the dollar rebounding from an earlier decline. The Kospi stock index, which recorded the biggest monthly decline since 1997 in October, jumped 1.4 percent to 1,129.08 at the close of trading in Seoul.

Shares in Shinhan Financial Group Co., which controls the nation's third-biggest bank, climbed 5.9 percent, and shipbuilder Hyundai Heavy Industries Co. gained 2.7 percent.

Time to Act

Korea's won has fallen 28 percent this year, Asia's worst performer, as investors dumped assets in emerging markets.

``Now is the time that a financial markets crisis is being transferred to the real sector and we need to get down to start to manage the situation,'' Kang said today.

The package will add 1 percentage point to the economic growth rate, which is at risk of falling below 3 percent next year if global conditions deteriorate further, he said.

South Korea also said it will cut the number of locations designated as speculative property-investment areas, which will make it easier for people to secure loans to buy homes.

``The measures will help spur local demand,'' said Chun Chong Woo, an economist at SC First Bank Korea Ltd. in Seoul. ``Still, we need more measures to support economic growth, especially to rescue troubled builders.''

Job Cuts

South Korea's economic growth cooled to 0.6 percent in the third quarter, the weakest pace since 2004, as exports declined by the most in seven years and consumer spending stagnated.

Manufacturers and retailers have been firing workers this year as demand eases and Korean builders are reeling under the largest backlog of unsold homes in a decade.

The government announced Oct. 21 it will spend as much as 8 trillion won to buy land and unsold homes.

Lawmakers last week approved the government's guarantee of $100 billion in bank debts to help lenders struggling to access foreign funds. South Korea will also supply banks with $30 billion in U.S. currency.

The government said today it will look at expanding a guarantee on bank deposits to cover holdings by South Koreans in foreign-currency accounts at local banks.

Reflecting today's package, the government's total expenditure will increase to 283.8 trillion won in 2009 from a previous forecast of 273.8 trillion won, the finance ministry said. National debt will be 34.3 percent of gross domestic product next year, up from an earlier prediction 32.3 percent.

``Concerns about foreign-currency liquidity seem to have mostly diminished and now is the time to take more close care of the real economy,'' President Lee Myung Bak said in a speech on local radio today.

To contact the reporter on this story: Seyoon Kim in Seoul at Skim7@bloomberg.net

Last Updated: November 3, 2008 01:35 EST