South Korea Unveils Powerful USD 22 Billion Economic Stimulus Budget to Revive Economy

South Korea economic stimulus takes center stage as President Lee Jae Myung announces a USD 22.1 billion supplementary budget aimed at revitalizing the nation’s struggling economy. As reported by the Korea Herald on June 19, this South Korea economic stimulus package totals 30.5 trillion won and marks the first major downward revision of projected revenue in five years — a 10.3 trillion won cut.

South Korea President Lee Jae Myung presenting economic
 stimulus budget 2025 at Cabinet meeting

South Korea President Lee Jae Myung justified the urgent fiscal intervention during a cabinet meeting, stating, “Fiscal soundness is important, but the economic downturn is too severe for inaction. It’s time to put public finances to use.” This South Korea economic stimulus plan is guided by two core principles: economic revitalization and equitable benefit distribution — either universally or targeted based on need.

South Korea Economic Stimulus Package: What’s Inside?

Approved by the Cabinet and set to be submitted to the National Assembly by Monday, the plan includes universal cash payments, making it one of the most direct South Korea economic stimulus measures ever introduced. Of the 30.5 trillion won total, 20.2 trillion won is new expenditure, with 15.2 trillion won allocated to economic activation and 5 trillion won toward livelihood support.

A central feature of the South Korea economic stimulus is a 10.3 trillion won “spending coupon” initiative. All citizens will initially receive at least 150,000 won, with lower-income individuals eligible for up to 500,000 won. A second phase will exclude the top 10% of earners, granting the remaining 90% an additional 100,000 won.

Additionally, 2.7 trillion won has been earmarked to boost the construction sector, which has seen four consecutive quarters of contraction. Another 1.2 trillion won is set aside for fostering startups and future-oriented industries such as artificial intelligence and renewable energy, ensuring that the South Korea economic stimulus serves long-term national interests.

The livelihood support component of this South Korea economic stimulus targets self-employed workers and small businesses facing record loan defaults. Within the 5 trillion won support, 1.4 trillion won will go toward debt relief for chronically distressed borrowers, while 1.6 trillion won will enhance the employment safety net, including delayed wage support and job-seeking benefits.

Meanwhile, the government’s revised revenue forecast reflects growing fiscal strain. Revenue projections for 2025 are now set at 642.4 trillion won, down from 651.6 trillion won, while total spending will rise to 702 trillion won, up from 673.3 trillion won. As a result, the fiscal deficit is expected to reach 110.4 trillion won — up from 91.6 trillion won last year — increasing the deficit-to-GDP ratio to 4.2%.

The South Korea economic stimulus strategy also includes plans to issue 19.8 trillion won in treasury bonds and fund the remaining budget gap with 10 trillion won from budget restructuring and reserve use. Despite the growing deficit, the Finance Ministry has reassured the public that South Korea’s fiscal health remains stable by global standards.

As of April-end, the country’s national debt stood at 1,200 trillion won, expected to surpass 1,300 trillion won by year-end, raising the debt-to-GDP ratio to 49%. The South Korea economic stimulus is projected to boost GDP growth by 0.1 to 0.2 percentage points. The Bank of Korea currently forecasts 0.8% growth, while the International Monetary Fund anticipates a modest 1% expansion.

In summary, this South Korea economic stimulus package underscores the government's strong resolve to combat economic stagnation and ensure both immediate and long-term support for its citizens. The comprehensive scope of the stimulus, from cash distributions to sectoral investment, demonstrates the administration's proactive stance toward economic stabilization and inclusive development.

Source | Ani