[Yongsan Report] Government Hesitates Over Supplementary Budget Card... "Early-Year Supplementary Budget Not Possible"

Indicating a Shift in Policy with Expansionary Fiscal Measures
Priority on Developing Solutions to Address Polarization
"Supplementary Budget at the Beginning of the Year Occurred Only Once During the IMF Era"

President Yoon Suk-yeol is delivering a greeting at the 56th National Breakfast Prayer Meeting held at the Shilla Hotel in Jung-gu, Seoul on the 22nd. Photo by Yonhap News

"It is correct to further pursue an expansionary fiscal policy, but it is impossible to prepare a supplementary budget (추경) early next year."

As the need for a supplementary budget at the beginning of the year has been raised to respond to sluggish domestic demand and slowing economic growth, the 고민 in Yongsan is deepening. As voices calling for a more active fiscal role in the face of weak domestic demand grow louder, the perception that a change in the government's long-emphasized 'sound fiscal policy framework' is inevitable is gaining strength. In particular, as President Yoon Seok-yeol has set 'resolving polarization' as a core national agenda in the second half of his term after passing the midpoint, there have been continuous calls for budgetary support. However, the Presidential Office and the Ministry of Economy and Finance actively agree on the need for an expansionary fiscal policy but have firmly drawn the line on the possibility of an early supplementary budget.

A senior official from the Presidential Office told Asia Economy on the day, "The early supplementary budget was only done once in decades, during the 1997 foreign exchange crisis," adding, "At that time, it was a reduction and the budget was already finalized, so it was possible, but this time it is physically an increase, and considering the timing, an early supplementary budget is impossible." The Ministry of Economy and Finance also dismissed the early supplementary budget rumors. The Ministry explained, "The 2025 budget bill is currently under review by the National Assembly, and we are not considering preparing a supplementary budget for next year."

The Presidential Office and the Ministry of Economy and Finance plan to focus on executing the budget confirmed early next year as discussions on increases are ongoing in the National Assembly, and if a budget is needed in the future to resolve polarization, they will additionally review the possibility of preparing a supplementary budget.

The Presidential Office is currently focusing on preparing measures to overcome polarization proposed by President Yoon. A senior official from the Presidential Office said, "The polarization resolution measures have not yet been announced, so talking about an early supplementary budget already is premature," adding, "We will first create the polarization resolution measures and then consider the next steps." Another official from the Presidential Office emphasized, "While maintaining the overall flow of a 'sound fiscal policy,' we will expand fiscal spending as necessary," and added, "Since tax policy is also important for resolving polarization, we will conduct a comprehensive review considering various measures."

Kim Jeong-sik, Emeritus Professor of Economics at Yonsei University, said, "With increasing domestic and external uncertainties, sluggish domestic demand, and weakening export competitiveness, it is necessary to strengthen the government's fiscal role to overcome the crisis," adding, "Since there are limits to stimulating domestic demand through interest rate cuts, the government needs to flexibilize the sound fiscal policy framework and implement an expansionary fiscal policy to overcome difficulties."