South Korean President Lee Jae Myung introduced a supplementary budget proposal of 30.5 trillion won (US$22.1 billion) aimed at revitalizing the economy of South Korean flags, reported on June 19th by the Korean Herald, a daily newspaper in English in South Korea.
The proposal includes a downward revision of forecasted revenue of 10.3 trillion won, reported South Korea’s Daily Life as the first adjustment in five years. “Although fiscal integrity and compliance with a balanced budgeting is important, the current recession is too severe for the government to wait. Now is the time to do general finances,” Lee said at a cabinet meeting on Thursday.
According to the news platform, the president highlighted the priorities of two guidelines in the proposal. “First, it stimulates the economy, and secondly, it ensures that profits are distributed quite a bit, whether universal or partially.
The plan features universal cash payments for all citizens, and is expected to be submitted to Parliament by Monday, with Cabinet approval.
According to the Ministry of Finance, reported by the South Korean Herald, the supplementary budget includes around 20.2 trillion won in new expenditures. Of that amount, 15.2 trillion won is directed at spurring economic activity, with 5 trillion won being designated to support livelihoods.
At the heart of the stimulus package is a 10.3 trillion cash distribution program issued in the form of “expense coupons.” Payments range from 150,000 won to 500,000 won, expanded at income levels. In the first phase, all Koreans receive a minimum of 150,000 won, while the low-income group receives more. In the second phase, the top 10% of earners will be ruled out, with the remaining 90% receiving an additional 100,000 won.
Additionally, 2.7 trillion won was allocated to support the construction sector. The construction sector has experienced a four-quarter shrinkage and continues to halt large resistance to domestic demand.
Approximately 1.2 trillion will support start-ups and next-generation industries such as artificial intelligence and renewable energy, promoting long-term economic development.
The 5 trillion wins in support of livelihoods focus on supporting small business owners and self-employed workers, many of whom face record loan defaults and business closures.
In this section, 1.4 trillion won will help alleviate debts for permanently tormented borrowers, while 1.6 trillion won will focus on strengthening the employment safety net, including job hunting benefits and support for late wages.
The government also revised its revenue forecast to 10.3 trillion won, marking the first such revision at the height of the Covid-19 pandemic since July 2020, the news platform added.
As of the end of April, the integrated fiscal balance, an important measure of South Korea’s fiscal health, recorded a deficit of 46.1 trillion won. This is the third-largest April shortfall in April, tracking only 2024 and 2020, and this gap will expand even further with this year’s additional 30 trillion won.
Currently, full-year revenue is projected at 642.4 trillion won, down from 651.6 trillion won, and total government spending has been revised upward from 673.3 trillion won to 702 trillion won.
Therefore, the government expects the integrated fiscal deficit at the end of the year to grow to 110.4 trillion won, up from 91.6 trillion won the previous year. This will raise the deficit to GDP to GDP ratio to 4.2%, with previous estimates rising compared to 3.3%, the news platform said.
National debt, which existed at approximately 1,200 trillion won at the end of April, is projected to exceed 1,300 trillion won by the end of the year, increasing the debt-to-GDP ratio to 49%.
According to South Korea’s Daily, the government is also planning to issue 19.8 trillion won in Treasury debt, which aims to close the fiscal gap, but plans to cover around 10 trillion won in budget restructuring and use of available reserves.
Despite the growing deficit, the Treasury emphasized that South Korea’s financial position remains sustainable by international standards, UK Daily added. The government is hoping that the additional budget will boost economic growth by 0.1 to 0.2 percentage points, pushing South Korea’s growth rate into the 1% range.
The Bank of Korea currently forecasts an annual growth of 0.8%, while the International Monetary Fund predicts an expansion of 1%.
