[Exclusive] Economy Recovers, but Government Considers '2nd Supplementary Budget' for Economic Recovery Next Month

Export and Domestic Demand Recovery... Economic Indicators Show Positive Signs
Fiscal Burden Increases... Experts Say "Premature"

[Image source=Yonhap News]

[Asia Economy Reporter Jang Sehee] It has been reported that the government has decided to prepare a second supplementary budget bill next month. The intention is for the fiscal policy to play a more active role amid the economic recovery and to support sectors where recovery is relatively slow. However, doubts are expected to arise about whether the supplementary budget is an appropriate response, considering that the overall economy, including exports, is recovering and the fiscal burden has already increased.

On the 24th, Asia Economy confirmed through multiple government officials that the Budget Office of the Ministry of Economy and Finance has begun internal reviews regarding the 'second supplementary budget preparation.' A government official stated, "President Moon Jae-in recently received a briefing on current issues from Deputy Prime Minister for Economy Hong Nam-ki and is understood to have requested a role for fiscal policy in establishing the economic policy direction for the second half of the year." The official added, "Since then, the Ministry of Economy and Finance has internally started reviewing the preparation of the supplementary budget." The Ministry plans to include this in the 'Economic Policy Direction for the Second Half of the Year,' to be announced in late June.

Although the government intends to use the second supplementary budget to accelerate economic recovery, the possibility of controversy seems high. If fiscal health warning signs are ignored while the economy is reviving, the government's future fiscal management burden will inevitably increase. In March, the Ministry of Economy and Finance prepared a supplementary budget of 14.9 trillion won for tailored damage support measures. Last year, the government poured in a massive 66.8 trillion won through four rounds of supplementary budgets.

The government is expected to allocate additional budgets to sectors lagging in recovery, such as tourism and youth employment, as well as vaccine development. On the 18th, President Moon said, "While some companies have led remarkable growth according to economic indicators, there are still places facing significant difficulties," and instructed, "Do your best to resolve polarization and focus on domestic demand recovery and employment stability."

Experts respond that it is premature to prepare a supplementary budget. Professor Andonghyun of Seoul National University’s Department of Economics said, "It is difficult to rule out the possibility of unexpected variables such as new COVID-19 variants," adding, "It is necessary to save ammunition for when the economy falls." He also emphasized, "If more fiscal spending is released, there is a possibility that inflation could intensify."