South Korea: President Lee unveils $22.1 billion stimulus package to revive economy; slashes revenue outlook, ramps up spending
File photo: South Korean President Lee Jae Myung (Picture credit: AP)
South Korean President Lee Jae Myung has introduced a 30.5 trillion won (USD 22.1 billion) supplementary budget plan aimed at revitalising the country's weakening economy and supporting struggling citizens, reported news agency ANI, citing The Korea Herald.
The proposal, which received Cabinet approval on Thursday, includes 20.2 trillion won in new spending and a downward revision of 10.3 trillion won in revenue projections, South Korea's first such adjustment in five years.
'Fiscal soundness and adherence to balanced budgeting are important, but the current downturn is too severe for the government to stand by,' Lee said at a Cabinet meeting, according to The Korea Herald.
'It is time to put public finances to use.'
President Lee emphasised two key priorities: stimulating economic growth and ensuring equitable distribution of benefits. Central to the stimulus is a universal cash handout scheme worth 10.3 trillion won, disbursed via spending coupons.
All citizens will initially receive a minimum of 150,000 won, while lower-income households will get more. A second round of payments will exclude the top 10 per cent of earners, with the remaining 90 per cent receiving an additional 100,000 won.
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As per news agency Reuters, this marks the second supplementary budget of the year, coming just weeks after Lee's June 3 election victory. His expansionary fiscal approach aims to counter sluggish domestic demand, compounded by external shocks including US President Donald Trump's tariff hikes and internal political turmoil.
The budget includes 2.7 trillion won for the beleaguered construction sector, which has seen four consecutive quarters of contraction.
An additional 1.2 trillion won is earmarked for future-oriented industries, such as AI and renewable energy, while 5 trillion won is set aside for livelihood support. This includes 1.4 trillion won for distressed borrower debt relief and 1.6 trillion won to boost job-seeking aid and delayed wage support for vulnerable workers.
The revenue forecast has been cut to 642.4 trillion won, down from 651.6 trillion won. Total government expenditure for 2025 has been revised upwards from 673.3 trillion won to 702 trillion won.
The resulting integrated fiscal deficit is expected to widen to 110.4 trillion won, or 4.2 per cent of GDP, up from last year's 3.3 per cent, with national debt forecast to exceed 1,300 trillion won, pushing the debt-to-GDP ratio to 49 per cent.
The government plans to fund the package with 19.8 trillion won in treasury bond issuances and an additional 10 trillion won from budget restructuring and reserves.
Despite the expanding deficit, the finance ministry said Korea's fiscal stance remains sustainable by global standards. The supplementary budget is projected to boost GDP growth by 0.1 to 0.2 percentage points.
The Bank of Korea currently projects 0.8 per cent growth, while the IMF expects a 1 per cent rise.
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