[Second Half Economic Policy] "Revive Domestic Demand"... Additional 15 Trillion Won Investment in Public Sector in Second Half

Additional 2 Trillion KRW Investment in Public Institutions by Accelerated Execution
5 Trillion KRW for Private Projects, 8 Trillion KRW Expanded for Policy Finance
Three Automobile Packages... Extension of Eco-friendly Vehicle Acquisition Tax Reduction

The government will inject an additional 15 trillion won into public investment, private investment projects, and policy finance to stimulate domestic demand in the second half of the year. The domestic demand revitalization bill, which failed to pass the National Assembly, will be reintroduced.

On the 3rd, the government announced the "2024 Second Half Economic Policy Direction" containing these details. Through early execution of next year's projects and credit enhancement, the government will increase investment in the public institution sector by about 2 trillion won. In the private sector, new target facilities will be actively identified, raising the goal from 15.7 trillion won at the beginning of the year to 20 trillion won plus alpha. The scale of loans and guarantees supported by policy finance institutions such as the Korea Development Bank will expand by about 8 trillion won, from 598.9 trillion won to 606.9 trillion won.

Efforts will also be made to resolve delays in the completion of construction projects. For public housing sites facing difficulties due to recent construction cost increases, the Housing and Urban Fund project cost support unit price will be adjusted to reflect reality. A task force (TF) led by the Ministry of Land, Infrastructure and Transport will be formed with related ministries to analyze factors driving up construction costs such as materials, labor, and expenses, and customized response plans by item and category will be prepared within the second half of the year. The government is also considering allowing lump-sum withdrawals from housing pensions for reconstruction contribution purposes.

To boost regional vitality, the government aims to fully utilize the 30 billion won Regional Revitalization Investment Fund within the year to promote regional development investment. The youth startup hubs utilizing idle and aging public office buildings will be expanded from the existing 2 zones to 17 zones. In response to the aging of public rental housing, existing public rentals will be redeveloped with high density and remodeled into mixed-use public housing complexes that serve as regional living and cultural centers.

The government will also reintroduce domestic demand revitalization-related bills that were previously proposed but failed to pass the plenary session of the National Assembly. These include a one-year extension of the temporary investment tax credit application period, treating acquisition of one house in depopulated areas as a single-homeowner, allowing online delivery within operating hours under large mart business regulations, and abolishing building regulations for urban-type residential housing.

To promote automobile consumption, three package policies were also announced. The additional electric vehicle subsidy proportional to industry discounts, currently applied only to electric passenger cars, will be temporarily expanded to electric cargo vehicles until the end of this year. The policy to temporarily reduce individual consumption tax by 70% (up to 1 million won) when replacing old vehicles will be reintroduced. The special individual consumption tax exemption period for eco-friendly vehicles such as hybrid, electric, and hydrogen cars will also be extended until 2026. Specific exemption limits will be included in the tax law amendment bill to be announced this month.

Additionally, out of the 52 trillion won facility investment fund support, 27 trillion won will be supplied in the second half of this year, and 192 trillion won in trade finance will be concentrated on promising countries and items in the second half. The 30 billion won raised through the Regional Revitalization Investment Fund is set with the goal of full utilization within the year to promote regional development investment. During the Chuseok holiday, 200,000 domestic tourism accommodation coupons will be issued in non-capital regions to encourage domestic tourism activation.

The government will also work to stabilize the project financing (PF) market and household debt sector, which are considered potential domestic risks. It will induce the systematization of professional personnel management to ensure real estate development is carried out by excellent companies. To increase the equity ratio of PF projects, incentives will be differentiated, and equity investments by financial investors will be promoted. The household debt ratio will be managed to keep the annual growth rate within the potential growth rate, and for this year, it plans to suppress it to the low 90% range.