South Korea passes expanded extra budget before tariff deadline
The stimulus package is the first since Lee Jae Myung took office last month after winning a snap vote with a pledge to boost growth
[SEOUL] South Korea’s parliament approved a 31.8 trillion won (S$30 billion) extra budget as new President Lee Jae Myung seeks to revive an economy struggling with weak consumption and mounting trade risks from US tariffs.
The figure is up from the 30.5 trillion won initially proposed by the government, with more money allocated for cash coupon handouts, the Finance Ministry said. Of the overall figure, 10.3 trillion won is set aside to cover revenue shortfalls for this year’s existing budget, as taxation income fell due to weak corporate performance and subdued consumer spending.
The opposition party boycotted Friday’s (Jul 4) vote over policy differences.
The stimulus package is the first since Lee took office last month after winning a snap vote with a pledge to boost growth. It’s also the second supplementary budget this year after a 13.8 trillion won budget was approved by parliament in May.
The passage comes just days ahead of a Jul 9 deadline for trade negotiations with the US. US President Donald Trump has said that his administration may begin sending out letters to trading partners as soon as Friday, setting unilateral tariff rates. South Korea’s Trade Minister Yeo Han-koo will be travelling to the US this weekend for a last-minute bid to extend the deadline.
“It’s still not clear to each side what the other side wants,” Lee said at a press conference in Seoul on Thursday, adding that the negotiations have not been easy so far. Without an agreement or an extension, across-the-board reciprocal tariffs on exports to the US will rise to 25 per cent from 10 per cent.
South Korea, a key US ally and major exporter of cars, semiconductors, and batteries, has seen its companies and its economy caught in the crosshairs of Trump’s tariff campaign. Shipments abroad are equivalent to more than 40 per cent of the size of the economy, making South Korea particularly vulnerable to US duties and any impact they have on global trade.
The government plans to fund the extra budget through a mix of spending cuts and debt issuance. The bulk will be financed through new sovereign bond sales, but there will also be a restructuring of existing outlays, the Finance Ministry had said before the extra budget was finalised.
Even before the election, the need for more fiscal stimulus was clear. Bank of Korea governor Rhee Chang-yong warned that additional measures would likely be required in 2025, underscoring the challenges facing Asia’s fourth-largest economy. BLOOMBERG
Share with us your feedback on BT's products and services
