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Calls grow for extra budget amid Middle East crisis
Minister of Finance and Economy Koo Yun-cheol speaks during a policy meeting at Government Complex Seoul, Wednesday. Yonhap
By Lee Kyung-min
The government is moving closer to drafting a supplementary budget, as escalating tensions in the Middle East drive up global oil prices amid slowing domestic demand, market analysts said Wednesday.
President Lee Jae Myung said the government may need to push ahead with an early supplementary budget to help cushion households and businesses from the economic fallout, particularly if energy prices remain elevated.
“If we are to provide fiscal support for small merchants and struggling companies, additional funding will be necessary,” Lee said during a Cabinet meeting Tuesday, adding that “it seems inevitable that an early supplementary budget will be required.”
The remarks effectively formalized growing discussion within the government about expanding fiscal support to mitigate the impact of the Middle East crisis on the domestic economy.
Minister of Finance and Economy Koo Yun-cheol also signaled readiness to mobilize additional fiscal tools.
Speaking at an emergency economic ministers’ meeting Wednesday, Koo said the government would consider all available policy measures, including a supplementary budget, to minimize the impact of the geopolitical shock on livelihoods and key industries.
“External uncertainties remain high, but Korea’s economy still has solid fundamentals, including strong core industries such as semiconductors and crisis response capacity like strategic oil reserves covering 208 days,” Koo said. “The government will serve as the frontline guardian of the economy with heightened vigilance.”
The growing momentum for fiscal support comes as energy markets remain volatile.
International crude prices briefly surged above $100 per barrel before easing following comments from U.S. President Donald Trump suggesting the possibility of resolving tensions involving Iran.
Higher oil prices and currency fluctuations could soon feed into consumer inflation, straining the lives of many, according to Lee In-ho, a former professor of economics at Seoul National University.
“After remaining in the low 2 percent range through February, consumer price growth could accelerate from March as higher energy costs ripple through the broader economy. This could deepen economic hardships, especially for low-income groups,” he said.
Any supplementary budget is likely to focus on cushioning the real economy impact of the energy shock while expanding support for vulnerable groups, according to Chang Jae-chul, founder and chief economist at the Pinnacle Economic Research Institute.
“When oil prices surged following the outbreak of the Russian invasion of Ukraine in 2022, the government introduced a more than 50 trillion won supplementary budget. This provided temporary emergency living subsidies for low-income households and expanded energy voucher programs to ease heating and cooling costs. I understand the government is considering something similar this time,” he said.
The government has unveiled a series of measures aimed at containing the immediate economic impact of rising oil prices.
Officials said they will monitor energy markets while reviewing additional fuel tax cuts and temporarily increasing diesel-linked fuel subsidies for truck, bus and taxi operators.