South Korea unveils $22 billion stimulus budget to revive Korean economy

Times of Oman

22-06-2025

Seoul: Lee Jae Myung, President of South Korea, has introduced a 30.5 trillion won ($22.1 billion) supplementary budget proposal aimed at revitalising Korea's flagging economy, reported the Korea Herald, a South Korean English-language daily newspaper, on June 19.
The proposal includes a 10.3 trillion won downward revision of projected revenue, the first such adjustment in five years, the South Korean daily reported.
"Fiscal soundness and adherence to balanced budgeting are important, but the current downturn is too severe for the government to stand by. It is time to put public finances to use," Lee said at a Cabinet meeting on Thursday, the news platform added.
According to the news platform, the president emphasised two guiding priorities in the proposal.
"First, stimulating the economy. And second, ensuring the benefits are fairly distributed -- whether universally or partially -- according to who needs them most. These are also questions of values and ideology," he said, quoted by the platform.
The plan, which features universal cash payments to all citizens, received Cabinet approval on Thursday and is expected to be submitted to the National Assembly by Monday.
According to the Finance Ministry, reported by the Korean Herald, the supplementary budget includes approximately 20.2 trillion won in new expenditure. Of that amount, 15.2 trillion won is directed at spurring economic activity, while 5 trillion won is designated for supporting livelihoods.
At the centre of the stimulus package is a 10.3 trillion won cash distribution program issued in the form of "spending coupons." Payments will range from 150,000 won to 500,000 won, scaled by income level. In the first phase, all Koreans will receive a minimum of 150,000 won, while lower-income groups receive more. The second phase will exclude the top 10 per cent of earners, with the remaining 90 per cent receiving an additional 100,000 won.
Additionally, 2.7 trillion won has been allocated to support the construction sector, which has experienced four straight quarters of contraction and remains a major drag on domestic demand.
About 1.2 trillion will go to support startups and next-generation industries such as artificial intelligence and renewable energy to promote long-term economic development.
The 5 trillion won in livelihood support is focused on aiding small business owners and self-employed workers, many of whom are facing record-high loan defaults and business closures.
Within this portion, 1.4 trillion won will help alleviate debt for persistently distressed borrowers, while 1.6 trillion won will go toward strengthening the employment safety net, including job-seeking benefits and support for delayed wages.
The government has also revised down its revenue forecast by 10.3 trillion won, marking the first such correction since July 2020 at the height of the COVID-19 pandemic, the news platform added.
As of the end of April, the integrated fiscal balance -- a key measure of Korea's fiscal health -- recorded a deficit of 46.1 trillion won, the third-largest April shortfall on record, trailing only 2024 and 2020. This gap is set to widen further when factoring in over 30 trillion won in additional spending this year.
Revenue for the full year is now projected at 642.4 trillion won, down from 651.6 trillion won, while total government spending has been revised upward from 673.3 trillion won to 702 trillion won.
Accordingly, the government anticipates the year-end integrated fiscal deficit will grow to 110.4 trillion won, up from 91.6 trillion won in the previous year. This would raise the deficit-to-GDP ratio to 4.2 per cent, compared to the earlier estimate of 3.3 per cent, the news platform said.
The national debt, which stood at about 1,200 trillion won at the end of April, is projected to exceed 1,300 trillion won by year's end, lifting the debt-to-GDP ratio to 49 per cent.
According to the South Korean daily, the government also plans to issue 19.8 trillion won in treasury bonds aimed at bridging the fiscal gap, while covering the remainder through approximately 10 trillion won in budget restructuring and the use of available reserves.
Despite the expanding deficit, the Finance Ministry emphasised that Korea's fiscal condition remains sustainable by international standards, the English daily added.
The government expects the additional budget to lift economic growth by 0.1 to 0.2 percentage points, pushing Korea's growth rate into the 1 percent range.
The Bank of Korea currently forecasts 0.8 percent growth for the year, while the International Monetary Fund projects a 1 percent expansion.