[2025 Economic Policy] 'All National Funds Mobilized'... 18 Trillion Public Resources Invested to Strengthen the Economy

Fund Increased by 2.5 Trillion Won, Public Investment at 66 Trillion Won
Policy Finance Expanded from 599 Trillion to 611 Trillion Won
Negative Impact of Budget Cuts "Fully Compensated"
Additional Measures Considered if Q1 Situation Worsens

The government will pour 18 trillion won of public funds into economic stimulus this year. This is a measure to respond to political turmoil that began with martial law, an unprecedented budget cut situation, and the launch of the new U.S. administration. With a predicted decline in growth rate, the government plans to mobilize all available resources including finance, taxation, and policy finance. The speed of support will proceed at an unprecedented pace.

Choi Sang-mok, Acting Prime Minister and Minister of Economy and Finance, presided over an expanded economic ministers' meeting at the Government Seoul Office in Jongno-gu, Seoul on the 2nd and announced the '2025 Economic Policy Direction' containing these details.

The government will inject 18 trillion won of available public sector resources into economic stimulus. From the beginning of the year, it will change major project fund plans to invest 2.5 trillion won and provide tax support such as lowering the flexible tax rate and tariff quotas. This year, public institution investment is set at 66 trillion won, an increase of more than 2 trillion won compared to last year. Private investment projects are budgeted at 5.2 trillion won, about 1 trillion won more than the five-year average. Policy finance supply has also increased from 599 trillion won last year to 611 trillion won this year.

The economic stimulus measures were largely prepared to compensate for the side effects of the reduced budget bill. This year's budget is 673.3 trillion won, 4.1 trillion won less than the government proposal. Key projects of the Yoon Seok-yeol administration, special activity expenses of power agencies, and government contingency funds were mainly cut. When fiscal spending decreases, economic growth rate usually faces downward pressure. Lee Chang-yong, Governor of the Bank of Korea, analyzed that the reduced budget bill has about a "-0.06 percentage point" impact on this year's growth rate.

The Ministry of Economy and Finance believes that the economic stimulus measures can offset the effects of the reduced budget. Among the budget cuts, about 1.2 trillion won were immediate cuts related to livelihood, and welfare for the vulnerable and livelihood measures can be implemented with the 18 trillion won economic stimulus plan. Kim Jae-hoon, Director of the Economic Policy Bureau at the Ministry of Economy and Finance, explained, "We have prepared measures sufficient to fully compensate for the negative effects of the reduced budget."

Execution speed as fast as possible... Additional measures if the situation worsens

To maximize the effect of the measures, execution will proceed as quickly as possible. The 'rapid execution' of the budget, which uses funds ahead of schedule, is the largest ever. The central government will execute 67%, and local governments 60.5% in the first half of the year. Livelihood and economic projects amounting to 85 trillion won will invest more than 40% in the first quarter and about 70% by the first half. Public institutions have also set the highest-ever rapid execution targets in line with this trend. Central public institutions will execute more than 57%, and local public institutions more than 58% of projects within the first half of the year.

Pre-fiscal year budget allocation projects also reached a record high of 11.6 trillion won. There was no pre-fiscal year budget allocation in 2023 and the previous year. This measure will advance the receipt dates of support funds for various livelihood projects. The Youth Job Leap Incentive, benefiting 100,000 people, will have its payment date moved up by about 9 days to January 3. Support schedules for agricultural, livestock, and fishery product discounts, senior jobs, and vocational training allowances will also be advanced. The increase in the discount rate for Onnuri gift certificates will be implemented on January 10 by adjusting the project schedule.

The possibility of additional economic stimulus measures was also suggested. The Ministry of Economy and Finance plans to re-examine overall economic conditions in the first quarter of this year. Since the U.S. government led by President Donald Trump will take office on the 20th of next month, this is to reflect economic indicators and livelihood conditions. They also announced that if the situation worsens, additional economic supplement measures will be considered.

However, they were reserved about the supplementary budget (Chugyeong). When asked whether a supplementary budget is necessary, Kim Beom-seok, First Vice Minister of Economy and Finance, said, "We will first respond with rapid livelihood execution," adding, "Please understand it as considering various response measures for uncertainties."