Gov't announces $8.6B extra budget for wildfires, trade and AI

Home > Business > Economy

Gov't announces $8.6B extra budget for wildfires, trade and AI

Published: 18 Apr. 2025, 11:16 Updated: 18 Apr. 2025, 17:10

Audio report: written by reporters, read by AI

Shoppers walk past vendors at a traditional market in Jongno District, central Seoul, on April 15. The Korean government announced a supplementary budget aimed at addressing urgent national priorities including small business support on April 18. [NEWS]

The Korean government unveiled the details of a 12.2 trillion won ($8.6 billion) supplementary budget aimed at addressing urgent national priorities including wildfire recovery, trade disputes, AI development and small business support on Friday.

The Ministry of Economy and Finance estimates the measure could raise GDP growth by 0.1 percentage points.

“This essential supplementary budget, set at 12.2 trillion won, is designed to respond swiftly to urgent issues facing the Korean economy, such as disasters, trade issues, AI competitiveness and livelihood stability,” said Vice Finance Minister Kim Yoon-sang on Friday.

The supplementary budget increased by 2.2 trillion won from the original 10 trillion won level.

“We took into account the fact that the scale of wildfire recovery continued to increase and domestic and international uncertainty has greatly expanded since the announcement of the U.S. reciprocal tariffs," said Kim. "In addition, as various sectors continuously raised the need for an expansion in scale, we additionally discovered highly effective projects during the consultation process with relevant ministries.”

Of the total, approximately 3.2 trillion won will go toward disaster response, 4.4 trillion won to trade and AI initiatives and 4.3 trillion won to livelihood support.

Acting President Han Duck-soo, left, and Minister of Economy and Finance Choi Sang-mok, right, pledge allegiance to the flag before a Cabinet meeting to review the supplementary budget plan for this year at the government complex in Jongno District, central Seoul on April 18. [JOINT PRESS CORPS]

The Finance Ministry estimated that this supplementary budget will raise the GDP growth rate by 0.1 percentage points. While the Bank of Korea (BOK) hinted at the possibility that the Korean economy may have experienced “negative growth” in the first quarter of this year, some are pointing out that the scale is insufficient to respond to the economy.

“Since the purpose was focused on disaster relief, tariffs and support for advanced industries, it is not purely for responding to the economy and will have an indirect effect,” the Finance Ministry said. It emphasized that it is not an “economic response supplementary budget” but a “necessary supplementary budget.”

To accelerate wildfire recovery, disaster response funding has been increased to 900 billion won — nearly double the previous 500 billion.

The government will also invest 1.7 trillion won in advanced firefighting apparatuses, including six helicopters, 30 AI surveillance cameras, 45 drones and 48 multipurpose fire trucks, along with new hazard pay for wildfire crews.

A helicopter is deployed to Gyeongju, North Gyeongsang as a wildfire broke out on April 17. [NEWS1]

To respond to trade conflict risks, the government plans to inject 25.4 trillion won in policy funds for affected businesses and double export voucher subsidies. As there are concerns that employment instability due to the trade crisis will increase, the government will ease the requirements for employment maintenance support funds and expand the number of support personnel.

In the AI and semiconductor sectors, the government will invest 1.8 trillion won. This includes securing 10,000 high-performance GPUs and leasing 20 million GPUs to elite teams developing Korean AI models. An additional 61.5 billion won will be allocated to AI talent development.

For small business owners, the government will offer 500,000 won in annual credit support for utility and insurance bills. A variety of new consumption promotion measures have also been prepared.

For businesses with annual sales of 3 billion won or less, a 20 percent increase in card spending will be refunded in the form of Onnuri gift certificates worth up to 300,000 won. A policy will also be implemented to provide a 10,000 won discount for three orders of 20,000 won or more using public delivery apps.

Apples are displayed at a traditional market in Seoul on April 17. As 28 percent of the country's apple farms have been affected due to wildfires in the North Gyeongsang region this year, prices of apples are expected to skyrocket in the second half of the year. [NEWS1]

Part of the reason the government is unable to make a larger supplementary budget is due to the fiscal burden. Of the 12.2 trillion won budget, 4.1 trillion will be funded by global surplus funds and available reserves, while 8.1 trillion won will require the issuance of deficit-financing bonds.

The supplementary budget will increase total government spending to 685.5 trillion won this year, a 4.4 percent rise from last year. The managed fiscal balance will worsen from minus 2.8 percent to minus 3.2 percent of the GDP, immediately exceeding the target of minus 3 percent, and the national debt ratio will rise from 48.1 to 48.4 percent.

Despite these concerns, lawmakers are pushing for a larger budget. The Democratic Party has proposed a 35 trillion won plan, with a minimum demand of 15 trillion won. The party plans to submit the proposal to the National Assembly early next week.

Kim left open the possibility of further expansion, saying, "If it is in line with the purpose of the supplementary budget to deal with it quickly and urgently, we will respond flexibly."

Ministry of Economy and Finance officials including Vice Finance Minister Kim Yoon-sang explain the new supplementary budget plans for this year at the government complex in Sejong on April 18. [NEWS1]

While the Finance Ministry stressed that the aim of the supplementary budget announced Friday was not to respond to the economy, amid signs from the BOK that the Korean economy may have contracted in the first quarter, criticisms are mounting that the scale of the budget is insufficient.

“Since the first quarter has already passed, this can’t be considered an early supplementary budget, and with a negative growth forecast, a 12.2 trillion won package to boost GDP by just 0.1 percentage point is inadequate,” said Woo Seok-jin, a professor of economics at Myongji University. “Especially since the purchase of GPUs involves capital outflow overseas, in terms of timing, content, and scale the budget is disappointing.”

Experts across the board pointed out that support for livelihoods is also lacking.

Acting President Han Duck-soo, left, and Minister of Economy and Finance Choi Sang-mok, center, speaks during a Cabinet meeting to review the supplementary budget plan for this year at the government complex in Jongno District, central Seoul on April 18. [JOINT PRESS CORPS]

“There are many policies along the lines of ‘spend and get reimbursed,’ which are neither intuitive nor effective in reversing the current downturn in sentiment,” said Ha Joon-kyung, a professor of economics at Hanyang University.

Given that further calls for another supplementary budget are likely after the presidential election, some experts argue that the government should prioritize only the most pressing needs for now.

“Since wildfire relief is urgent, it’s realistic to carry out the first supplementary budget quickly and handle any shortfalls through a second supplementary budget after the election,” said Kim Sang-bong, a professor of economics at Hansung University. “Since much of the annual budget has already been frontloaded in the first half, there will be less fiscal room in the second half to respond to the economy.”

"Considering that bipartisan agreement is difficult right now, it would be best to proceed with a minimal, uncontested supplementary budget and then adjust the shortfalls and policy direction after a new administration takes office,” echoed Prof. Ha.

A traditional market in Jongno District, central Seoul is seen on April 15. [NEWS1]

As talk of a second supplementary budget emerges even before the first one is finalized, some experts stress the need to reconsider the very nature of supplementary budgets.

“Supplementary budgets are meant to address ‘urgent situations,’ so basically, the main budget should be handling this,” said Hur Joon-young, a professor of economics at Sogang University. “Many of Korea’s current economic challenges are not ones that can be resolved simply by injecting government money. The new administration should draft the main budget based on a mid- to long-term plan. Trying to push everything into supplementary budgets leads to inefficient fiscal management.”

Updated, April 18, 2025: Added expert analysis of the proposed budget.

Translated from the JoongAng Ilbo using generative AI and edited by Korea JoongAng Daily staff.

BY KIM YEON-JOO, IM SOUNG-BIN [[email protected]]