Impact of extra budget uncertain amid Middle East crisis
Surging energy prices and a series of downward revisions to Korea's growth outlook are raising questions about whether the government's planned 25 trillion won ($16.5 billion) supplementary budget will effectively cushion the economic fallout from the Middle East crisis. Analysts said Sunday the package could help ease the immediate burden on households, but would have a limited impact on growth if external volatility persists and inflationary pressures continue. The OECD last Thursday cut its 2026 growth outlook for Korea to 1.7 percent from its December projection of 2.1 percent, citing potential strains from the Iran crisis and rising energy costs. Global investment banks have made similar revisions. Citibank recently lowered its forecast to 2.2 percent from 2.4 percent, while Barclays trimmed its estimate to 2 percent from 2.1 percent. In a recent report, the Woori Financial Research Institute said that if international oil prices remain above $100 per barrel, Korea’s annual growth could fall by more than 0.5 percentage points given the economy’s heavy reliance on energy imports.
