Gov't approves 20.2 trillion won supplementary budget, including voucher payments of up to 520,000 won per person

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Gov't approves 20.2 trillion won supplementary budget, including voucher payments of up to 520,000 won per person

Published: 19 Jun. 2025, 17:45 Updated: 19 Jun. 2025, 20:11

Audio report: written by reporters, read by AI

A citizen shops at Mangwon Market in Mapo District, western Seoul, on June 19. [NEWS1]

Facing a sharp economic slowdown, Korea will roll out a sweeping stimulus package as early as next month that includes voucher payments of up to 520,000 won ($377) per person and debt relief for struggling small business owners.

The Cabinet on Thursday approved President Lee Jae Myung’s first supplementary budget, a 20.2 trillion won increase in spending, aimed at reviving domestic consumption, easing inflation pressures and restoring confidence in the early months of the new administration.

“The shock from U.S. tariffs, sluggish domestic consumption and a downturn in construction investment have sharply weakened growth momentum,” the government said. “A vicious cycle is forming as economic hardship deepens and financial risk builds in vulnerable sectors. We seek to break that cycle and restore a virtuous one.”

The supplementary budget was drafted unusually quickly — just 15 days after President Lee took office. The government urged lawmakers to pass the bill quickly, saying, “We hope this will spark hope for people facing hardship.”

The centerpiece of the plan is a 20.2 trillion won increase in spending. The largest item is a national consumption voucher program totaling 10.3 trillion won. Payments will be tiered, depending on income levels — basic welfare recipients will receive 500,000 won; near-poverty groups 400,000 won; the general public 250,000 won; and the top 10 percent of earners 150,000 won. Residents of 84 rural and coastal regions classified as at risk of depopulation — about 4.1 million people — will receive an additional 20,000 won in the first round.

The government expects to submit the plan to the National Assembly on Monday and begin distribution of coupons roughly two weeks later, likely by mid-July. The timeline is similar to the 2020 emergency relief program, during the Covid-19 pandemic, which was approved in late April and began payments by May 4.

People shop at Mangwon Market in Mapo District, western Seoul, on June 19. [NEWS1]

Initially, the administration favored a universal approach, reflecting President Lee’s and the Democratic Party’s commitment to nondiscriminatory welfare. However, with limited fiscal space and the higher marginal propensity to consume among low-income groups, the plan was revised to a differentiated payout.

Second Vice Minister of Finance Lim Ki-keun said the approach is “a practical compromise that upholds universal welfare values within real-world constraints.”

Other initiatives to stimulate consumption include expanded support for local gift certificates, with 600 billion won in government funding allocated to increase discount rates for consumers. In depopulating regions, the discount rate will rise from 10 to 15 percent. In noncapital regions, the rate will increase to 13 percent, while capital region rates will be standardized at 10 percent. For financially independent local governments that do not receive general subsidies, a minimum rate of 7 percent will be applied.

Additional measures include a 10 percent rebate on purchases of high-efficiency home appliances, capped at 300,000 won per person; 7.8 million discount coupons for five major consumption sectors — lodging, movie theaters, sports facilities, art exhibitions and performing arts; and expanded vacation subsidies for small and medium-sized enterprise workers, increasing the number of beneficiaries from 65,000 to 150,000.

The government also earmarked 3.9 trillion won to stimulate the construction sector and support investments in new industries such as artificial intelligence.

A separate 5 trillion won package targets livelihood stabilization. It includes support for small business recovery, stronger job security programs, inflation control and assistance for vulnerable groups.

A key feature is a debt relief initiative for long-overdue loans. The government will buy from lenders small delinquent debts — up to 50 million won — that have been unpaid for over seven years (excluding secured loans). If a borrower is deemed unable to repay at all, the debt will be written off entirely.

People shop at Mangwon Market in Mapo District, western Seoul, on June 19. [NEWS1]

In other cases, partial relief of up to 80 percent will be offered, with the remaining balance restructured into long-term installment plans of 10 years or more. Small business owners will not need to apply separately.

The supplementary budget also includes a 10.3 trillion won revision to expected revenue, bringing the total package to 30.5 trillion won. This means the government plans to reduce its previously approved 2025 revenue target by that amount. Lower-than-expected corporate tax payments in April, weak VAT receipts amid sluggish consumption, and continued fuel tax cuts due to global oil price spikes all contributed to the shortfall.

To finance the budget, the government will issue 19.8 trillion won in new bonds. The remainder will come from 5.3 trillion won in spending cuts (including unexecuted infrastructure funds), 2.5 trillion won in fund reserves, and 3 trillion won in adjustments to foreign exchange stabilization bonds.

Joo Won, director of economic research at the Hyundai Research Institute, said the supplementary budget was well-timed.
“Given the severity of the slowdown and the fact that it comes early in the administration, this budget gives needed momentum,” he said.

If passed, the 2025 national budget will increase 6.9 percent to 702 trillion won — the first time it surpasses 700 trillion. That’s nearly a 100 trillion won jump in just three years, following the 2022 milestone of 600 trillion.

With the new budget, the managed fiscal deficit is projected to worsen from 3.3 percent to 4.2 percent of GDP, and the national debt ratio from 48.4 percent to 49 percent.

People shop at Mangwon Market in Mapo District, western Seoul, on June 19. [NEWS1]

Lee Yoon-soo, an economics professor at Sogang University, said that while Korea’s debt level remains relatively modest by international standards, the pace of deterioration is among the fastest in the world.

“This rapid worsening warrants caution,” he said. He also warned that weak demand in the global bond market — including in the United States and Japan — could make large-scale issuance more disruptive.

The consumption voucher program also drew criticism. Kim Jin-ill, an economics professor at Korea University, said, “More differentiation should have been applied to focus support on low-income groups.” He added that this is a valuable opportunity to study the actual economic effects of consumption coupons.

Ahn Dong-hyun, a professor of financial economics at Seoul National University, said the supplementary budget is a short-term stimulus.

“To achieve lasting job growth, Korea also needs medium- to long-term reforms such as deregulation in services like finance, education and health care,” he said. “Given Korea’s export dependence, mitigating U.S.-driven trade risks must also be a priority.”

Translated from the JoongAng Ilbo using generative AI and edited by Korea JoongAng Daily staff.
BY KIM MIN-JOONG, JANG WON-SEOK [[email protected]]