South Korean President Lee Jae-myung has reaffirmed his administration's commitment to an expansive fiscal strategy, calling for a stronger role of government intervention in reviving the country’s economy. Addressing the nation on his 30th day in office, Lee emphasized that national finance must now take on a "bold and proactive" role to tackle mounting economic and social pressures.
President Lee's remarks come as the government pushes forward a second supplementary budget worth 30.5 trillion won (approximately USD 14.7 billion), which follows an earlier stimulus package unveiled in May. The second extra budget is designed to boost domestic demand, support struggling sectors, and provide universal cash handouts of 250,000 won to every citizen. A significant portion of the funding, nearly 19.8 trillion won, will be raised through the issuance of new treasury bonds.
This expansionary approach will increase South Korea’s budget deficit to around 4.2 percent of GDP and raise public debt to roughly 49 percent. President Lee defended the fiscal strategy by describing the current economic climate as “desperate,” urging the National Assembly to quickly pass the budget to prevent further slowdown.
The South Korean economy is under considerable strain, with the Bank of Korea forecasting a meager growth rate of 0.8 percent for 2025, down from earlier expectations of 1.5 percent. First-quarter data revealed a contraction, and factory activity has declined for five consecutive months, mainly due to weak export performance to key partners like the United States and China.
In response, the supplementary budget includes measures to stimulate exports, especially in the technology and semiconductor sectors, while also promoting investment in artificial intelligence, construction, and small businesses. Additional initiatives focus on restructuring debt burdens for small firms and enhancing consumer confidence.
On the diplomatic front, President Lee stressed the importance of maintaining a strong alliance with the United States, particularly amid complex trade negotiations over potential reciprocal tariffs. The talks, set to conclude by July 8, have yet to yield consensus, with Washington pressing Seoul on non-tariff trade practices.
Simultaneously, Lee signaled a pragmatic approach to regional diplomacy, expressing openness to more balanced engagement with China and Russia. In a notable move aimed at reducing military tensions, Lee has also suspended loudspeaker propaganda broadcasts at the North Korean border, favoring dialogue over confrontation.
Beyond immediate economic relief, President Lee has outlined a longer-term vision for structural reforms. These include revising corporate governance laws to enhance shareholder rights, expanding trade partnerships through initiatives like the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), and addressing systemic inequality.
Despite the ambitious agenda, challenges remain. Analysts warn that reform efforts may face resistance from South Korea’s powerful conglomerates and entrenched political interests. However, Lee’s government appears determined to break from austerity and prioritize public welfare and inclusive growth.
As South Korea navigates an increasingly volatile economic landscape, the success of President Lee’s fiscal and policy measures will be closely watched both domestically and internationally. The coming weeks will be critical as Parliament debates the supplementary budget and negotiators seek to defuse looming trade tensions.