South Korea announces $22 billion stimulus budget to restore its economy

According to reports, South Korea’s English Daily South Korea South Korea South Korea South Korea South Korea Budget reported that South Korean President Lee Jae Myung launched a supplementary budget proposal of 305,000 won (US$22.1 billion) on June 19.

The proposal includes a 103 trillion yuan expected revenue winning revision, the first adjustment in five years, according to the Korea Daily. “Financial soundness and compliance with balanced budgets are very important, but the current decline is too severe for the government to bear. It’s time to use public finances,” Lee said at a cabinet meeting on Thursday.

According to the news platform, the president highlighted two guiding priorities for the proposal. He said: “First, stimulate the economy.

The plan to provide universal cash payments to all citizens was approved by the cabinet on Thursday and is expected to be submitted to the National Assembly by Monday.

The supplementary budget includes about 20.2 trillion won new spending, according to the Ministry of Finance reported by the Korea Herald. Of these, 15.2 trillion won is targeted to stimulate economic activity, while 5 trillion won is designated as support for livelihoods.

The center of the stimulus package is the 103 trillion won cash distribution plan released in the form of “spension coupons”. Expanding at income level, payments will range from 150,000 won to 500,000 won. In the first phase, all Koreans will receive at least 150,000 won, while low-income groups will receive more. The second phase will exclude 10% of the top earners, with the remaining 90% receiving 100,000 won.

Additionally, 2.7 trillion won has been allocated to support the construction sector, which has experienced four quarters of contraction and is still causing significant obstacles to domestic demand.
About $1.2 trillion will support startups and next-generation industries such as artificial intelligence and renewable energy to boost long-term economic development.

The 5 trillion won focus on livelihood support is assisting 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 from persistently poor borrowers, while 16 trillion won will be used to strengthen the employment safety net, including job seeking benefits and support for delayed wages.

The news platform added that the government also reduced its revenue forecast by 103 trillion won, marking the first correction during the COVID-19 pandemic since July 2020.

As of the end of April, the combined fiscal balance (a key measure of South Korea’s fiscal health) recorded a deficit of 46.1 trillion won, the third largest April shortage on record, lagging only behind 2024 and 2020. This gap will be further widened in an additional 300,000 wins this year.

Revenue for the entire year is now expected to be 642.4 trillion won, down 6.516 million won, while the government’s total spending has risen from 673.3 trillion won to 702 trillion won.

Therefore, the government expects the year-end comprehensive fiscal deficit to grow to 110.4 trillion won, up from the previous year’s 91.6 trillion won. This will increase the deficit-to-GDP ratio to 4.2%, compared with an earlier estimate of 3.3%, the news platform said.

The country’s debt was about 120 trillion won by the end of April and is expected to exceed 1300 trillion won by the end of the year, increasing the debt-to-GDP ratio to 49%.

According to the Korea Daily, the government also plans to issue 19.8 trillion won in treasury bills aimed at bridging the fiscal gap, while covering the rest through budget restructuring and using approximately 100 trillion won of available reserves.

Despite the increasing deficit, the Ministry of Finance stressed that South Korea’s fiscal situation is still sustainable by international standards. The government expects that the additional budget will increase economic growth by 0.1 to 0.2 percentage points, thereby increasing South Korea’s growth rate to 1%.

South Korea is currently forecasting a year-on-year growth of 0.8%, while the International Monetary Fund is expected to increase by 1%.