South Korea's Government Approves Additional Budget for Economic Recovery

On July 4, 2025, the South Korean National Assembly passed the second supplementary budget for the year, which includes the distribution of 'Consumer Recovery Coupons' ranging from 150,000 to 550,000 KRW per person. This budget increases total government spending from 687.1 trillion KRW to 703.3 trillion KRW, marking an increase of 16.2 trillion KRW. The overall supplementary budget amounts to 31.8 trillion KRW, which includes a reduction of 10.3 trillion KRW in revenue plans.

The vote took place in the absence of the opposition party, People Power Party (국민의힘), with 168 votes in favor, 3 against, and 11 abstentions from a total of 182 members present. Last-minute negotiations between the ruling Democratic Party (더불어민주당) and the opposition failed to reach an agreement. The opposition demanded an apology for the restoration of the presidential office's special activity budget, which had been entirely cut during the previous administration, and insisted that local development project budgets should not be included in the supplementary budget.

This supplementary budget is the first under President Lee Jae-myung's administration, reallocating 6.4 trillion KRW from existing projects and increasing funding for new initiatives, including the 'Consumer Recovery Support Fund' by 22.6 trillion KRW. Initially, the government proposed a total expenditure increase of 14.9 trillion KRW, but during the National Assembly's review, an additional 2.4 trillion KRW was added while 1.1 trillion KRW was cut, resulting in a larger overall increase.

As a result of this budget, the projected fiscal deficit for the year is expected to reach 111.7 trillion KRW, approximately 4.2% of the GDP. National debt is anticipated to rise to 1,301.9 trillion KRW, an increase of 21.1 trillion KRW, raising the debt-to-GDP ratio from 48.4% to 49.1%.

The government plans to distribute a total of 13.8 trillion KRW in 'Consumer Recovery Coupons' to 51.17 million citizens, with amounts varying based on income levels. The top 10% of earners will receive 150,000 KRW, while the general public will receive 250,000 KRW, lower-income groups will get 400,000 KRW, and basic livelihood recipients will receive 500,000 KRW. Additionally, residents in rural areas facing population decline will receive an extra 50,000 KRW, and those living outside the capital will receive an additional 30,000 KRW.

Of the 13.2 trillion KRW allocated for the coupons, 10.3 trillion KRW will be funded by the central government, with the remainder covered by local governments. The Democratic Party increased the central government's share by 1.2 trillion KRW during the budget review process, resulting in an additional burden of 1.8 trillion KRW for the government due to the expanded coupon distribution.

Furthermore, the supplementary budget allocates 27 trillion KRW to stimulate the construction sector, 14 trillion KRW for debt relief for small businesses, 13 trillion KRW to expand unemployment benefits, and another 13 trillion KRW for investments in new industries.

The special activity budgets for the presidential office, Board of Audit and Inspection, prosecution, and police, which were fully cut by the Democratic Party when they were in opposition, have been restored to 10.5 billion KRW, with 4.125 billion KRW designated for the presidential office.

During the budget discussion, People Power Party member Park Soo-min criticized President Lee for previously cutting the special activity budget, questioning how the government would justify its reinstatement. He urged the Democratic Party to secure the 4.125 billion KRW for the presidential office but also called for a sincere apology to the public.

Democratic Party member Lee So-young countered that the opposition's resistance to increasing total government spending was unfounded, citing the 31 trillion KRW revenue shortfall caused by the previous administration's tax cuts. She argued that the additional 13 trillion KRW spending approved by the National Assembly was merely a drop in the bucket compared to the economic damage inflicted by the previous government.