South Korea’s parliament approved a 13.8 trillion won ($9.7 billion) supplementary budget on Thursday to support an economy hit by sluggish domestic demand and rising concerns over the potential fallout from U.S. tariffs.
The extra spending was agreed upon earlier in the day by leaders of the Democratic Party and the ruling People Power Party, exceeding the government’s original proposal of 12.2 trillion won.
The revised package includes 200 billion won in aid for discounts on fresh produce and wildfire-affected areas, 400 billion won for regional vouchers, and 800 billion won earmarked for infrastructure construction.
Asia’s fourth-largest economy posted an unexpected contraction in the first quarter, according to data released last week. Stagnant exports and consumption, compounded by uncertainty around Washington’s aggressive trade measures, have raised expectations of further interest rate cuts by the Bank of Korea.
Construction investment saw the steepest decline, falling 3.2% during the quarter.
When first unveiling the smaller 12.2 trillion won proposal earlier this month, the government had left the door open for adjustment, acknowledging that the timing of stimulus was critical, despite tight bond market conditions.
The Democratic Party, which holds a parliamentary majority, had initially pushed for a significantly larger package—up to 35 trillion won—including cash-like payments aimed at stimulating domestic consumption.
Economists suggest another supplementary budget could be on the table later this year, depending on the results of the snap presidential election scheduled for June 3.
The Bank of Korea recently signaled it may revise down its February forecast of 1.5% economic growth at its upcoming policy meeting in May. Separately, the International Monetary Fund slashed its 2025 growth forecast for South Korea from 2% to 1%.
