Korea to hike extra budget to $8.44 bil. on heightened risks

Economy and Finance Minister Choi Sang-mok presides over a meeting of economy- and commerce-related ministers at Goverment Complex Seoul, Tuesday. Yonhap

The government has proposed to increase the much-anticipated supplementary budget to 12 trillion won ($8.44 billion) from the previous 10 trillion won in light of the heightened threats against Korea’s exports and protracted consumer spending, officials said Tuesday.

The revised proposal came after Economy and Finance Minister Choi Sang-mok’s March 30 announcement on an extra budget worth 10 trillion won, which did not take into account worse-than-expected external and internal risks afterward.

These risks include U.S. President Donald Trump’s tariff hike on American trading partners, which has spooked Korean exporters and investors in the local stock market.

On the domestic front, the country’s worst-ever wildfires that swept the southeastern region in March took a heavier toll on supply of regional produce, jobs and consumer demand for relevant items.

Containers are piled up for exports at a port in Busan, April 1. Newsis

“Under the circumstances, we’re in a pressing need to implement the supplementary budget,” Choi said as he presided over a meeting of economy- and commerce-related ministers at Government Complex Seoul, Tuesday.

The planned extra budget will require the National Assembly’s approval, and accordingly, the finance minister called for “bipartisan support for the swift passage of the bill.”

He added, “Timing is of the essence when it comes to supplementary budget, and I cordially request legislative cooperation.”

The revised budget plan remains unchanged in its initial focus on three areas: responding to emergencies and disasters, boosting competitiveness in trade and artificial intelligence (AI) and improving people's livelihoods.

While the finance ministry did not specify last month how much it would allocate to each area, it said Tuesday that more than 3 trillion won is planned for disaster response.

Additionally, the government seeks to draw up more than 4 trillion won to address intensifying global competition in trade and AI, and another 4 trillion won to support economically stricken individuals and small businesses.

In particular, the government will ramp up support for the semiconductor industry and help prepare for the end of Trump’s 90-day tariff pause which was announced last week.

As part of the extra budget for trade, a total of 70 billion won will be spent on subsidies for small and medium-sized enterprises (SMEs) that manufacture high-end materials and equipment in the chip-making process.

These SMEs will be also allowed to take out loans at a lower-than-market rate.

For the planned mega-sized semiconductor cluster, the government will double the amount of support to 100 billion won from the current 50 billion.

These support measures, according to the finance ministry, will be taken under a broader goal of expanding chip sector investments to 33 trillion won from 26 trillion won.

With regard to AI, 1.8 trillion won will be compiled to speed up efforts for Korea to become one of the world’s top three nations.

Correspondingly, an extra budget will be used to secure a supply of graphics processing units (GPUs), a vital part of AI development.

It will also be used to create the country’s first private-public fund, which was initially planned at 90 billion won but will be expanded to 200 billion won.

In the meantime, the main opposition Democratic Party of Korea (DPK), which holds a majority in the National Assembly, said the government’s revised proposal for the supplementary budget “still appears to be insufficient."

The DPK said it will try to increase the amount to at least 15 trillion won when the proposal is officially submitted to the Assembly.