South Korean parliament passes higher 2020 budget as growth falters

SEOUL (Reuters) - South Korea's parliament on Tuesday approved next year's sharply higher 512.3 trillion won ($434.40 billion) government budget to support a faltering economy and expand welfare spending.

It marked a 9.1% increase from this year's budget of 469.6 trillion won when excluding a 5.83 trillion won extra spending bill adopted later in the year, although scaled down from the government's proposal for 513.5 trillion won.

South Korea's fiscal year starts on Jan. 1.

Asia's fourth-largest economy, heavily reliant on exports of computer chips, smartphones, cars and ships, looks on track for around 2% growth this year, its worst performance in a decade.

The government expects next year's fiscal deficit to reach 3.5% of annual gross domestic product, the largest in a decade and far bigger than the 2.2% deficit for this year, even including the extra budget.

The central bank cut the policy interest rate by half a percentage point in two steps this year to a joint record low of 1.25% and markets have priced in the chance of further easing next year.

The government plans to allocate 180.5 trillion won, or more than a third of the total spending budget, on strengthening healthcare and welfare programmes and supporting employment. ($1 = 1,179.3300 won)

(Reporting by Choonsik Yoo; Editing by Nick Macfie)