Yoon: "Be More Bold"... Yongsan Prepares Year-End and New Year Measures for Domestic Demand and Consumption

Economic Uncertainty Prompts Presidential Office to Focus on Domestic Demand and Consumption
Yoon Orders Aides to Implement "More Bold Policies"
Banking Sector to Provide Financial Support for Timely Interest Payers Within the Year

President Yoon Suk-yeol is greeting a merchant at Gongju Sanseong Market in Chungnam on the 2nd. Photo by Yonhap News

The Presidential Office has actively begun preparing measures to stimulate domestic demand and consumption. As concerns over sluggish domestic demand and exports have recently increased, the Presidential Office is interpreted to have rolled up its sleeves to revitalize the economy at the end of the year and the beginning of the new year. First, the banking sector plans to increase financial support for borrowers who faithfully repay their loan interest within the year.

A senior official from the Presidential Office said in a phone interview with Asia Economy on the 3rd, "We are reviewing various measures related to stimulating consumption and domestic demand," adding, "Some will be announced as soon as the policies are prepared."

This is a follow-up measure in response to President Yoon Seok-yeol's directive at the chief secretary meeting the previous day to "devise proactive measures to stimulate domestic demand and consumption." A senior official from the Presidential Office conveyed, "President Yoon ordered at the meeting to implement more bold related policies so that the public can feel the effects."

At a public discussion on livelihood held in Gongju, Chungnam the previous day, President Yoon also mentioned the importance of related measures, saying, "The most important thing is consumption." He said, "In the U.S., there are many exemptions from income tax bases on consumption or credit card payments made at the end of the year," emphasizing, "We need to understand that consumption is important."

In particular, President Yoon stressed the active role of related ministries, saying, "Stimulating domestic demand is not just about providing various supports to self-employed and small business owners," and "The government must actively enable people to go out and spend money."

President Yoon Suk-yeol is holding a public discussion on livelihood titled "Small Business Owners and Self-Employed Running Again, Vibrant Neighborhood Commercial Districts" with the people at Art Center Goma in Gongju, Chungnam on the 2nd. Photo by Yonhap News

Inside and outside the government, temporary year-end increases in income deduction rates, policy fund support for self-employed who faithfully repay loan interest, expansion of refunds and Onnuri gift certificates, issuance of vacation and accommodation coupons, etc., are being discussed.

A Presidential Office official explained, "Various methods are under review, but nothing has been concretely decided yet," adding, "Financial support plans for self-employed who faithfully repay loan interest will be autonomously prepared by the banking sector within the year."

Since President Yoon mentioned the U.S. year-end income tax reductions, there is a possibility of more boldly expanding the income deduction rate for year-end consumption that exceeds the previous year. Previously, the government announced that it would raise the income deduction rate on increased credit card usage from 10% to 20% in the second half of the year to promote consumption.

However, a Presidential Office official explained, "The income deduction rate requires legal amendments," and it is not easy to change it immediately.

The reason the Presidential Office is preparing such bold measures to stimulate consumption and domestic demand is because the economic situation is not favorable. The Bank of Korea recently lowered its economic growth forecast for South Korea next year from 2.1% to 1.9%, citing sluggish domestic demand recovery and concerns over exports due to strengthened protectionism.

With the working-age population gradually decreasing, the pace of domestic demand recovery is slow, and as export uncertainties increase, there are even concerns that the potential growth rate could fall to the 1% range.

The government plans to include policies related to stimulating consumption and domestic demand in the President’s polarization countermeasure announcement early next year and in the Ministry of Economy and Finance’s economic policy directions.