Korea plans its largest-ever extra budget as Yoon pursues growth

SEOUL • South Korea announced its largest-ever extra budget as President Yoon Suk Yeol seeks to shore up an economic expansion that’s been weighed down by the omicron outbreak and other global headwinds.

The 59.4 trillion won (US$46.3 billion) proposal, to be reviewed by parliament, includes 26.3 trillion for small businesses, 6.1 trillion won for pandemic workers and 3.1 trillion won for subsidies to people vulnerable to consumer price hikes, according to the Finance Ministry.

The proposal was unveiled after Yoon took office on Tuesday calling for “fast growth” to create opportunities for people and to bridge social and economic disparities. In his first meeting with secretaries on Wednesday, the president highlighted inflation as the biggest economic concern, a view later echoed by the finance minister at his own swearing in ceremony.

Neither specifically addressed how they intend to curb inflation.

South Korea’s economy slowed in the first quarter as omicron spread rapidly and now faces a range of global risks including Russia’s war on Ukraine and a weakening economy in China. Tightening monetary policy around the world to curb inflationary pressures is also weighing on business sentiment.

No bonds will be issued to fund the extra budget, South Korea’s Finance Ministry said in a statement. Instead, the government will rely on extra revenue and restructure its finances to deliver the stimulus, it said.

Debt to gross domestic product will edge down from 50.1% to 49.6% as South Korea reduces borrowing by using extra tax revenues, the ministry said.

South Korea has relied on a string of extra budgets to soften the blow from the pandemic, leading to a rapid rise in its debt load in the past five years.

Yoon expressed concerns about the debt-to-GDP ratio going over 50% during the campaign, while pledging large-scale stimulus targeted at small and medium businesses. — Bloomberg