Tax exemptions and incentives are expected to increase by 3.6 trillion won ($2.9 billion) this year as the government seeks to underpin the economic recovery and support vulnerable people, the finance ministry said Tuesday.

The value of the tax exemptions and credit is estimated at 59.5 trillion won this year, up from the 55.9 trillion won tentatively provided last year, according to the Ministry of Economy and Finance.

The percentage of tax subsidies against total tax revenue and tax benefits is likely to reach 13.9 percent this year, up from 13.3 percent the previous year.

The government said it is likely to collect 367.4 trillion won in state taxes this year, larger than 363.9 trillion won a year earlier.

South Korea has increased tax exemptions or credit programs to support smaller firms and merchants hit hard by the COVID-19 pandemic.

Last year, the country's tax revenue rose 58.5 trillion won on-year amid the economic recovery and booms in asset prices.

The finance ministry said it plans to provide tax subsidies to the needy to help revitalize the economy and also make efforts to cut unnecessary tax incentives.

The South Korean economy has been on a recovery track on the back of brisk exports. But it also faces heightened economic uncertainty at home and abroad amid the fast spread of the omicron COVID-19 variant and the Ukraine crisis.

The Bank of Korea forecast Asia's fourth-largest economy to grow 3 percent this year after the 4 percent expansion last year. (Yonhap)