New Korean President’s First Move: Economic Rescue Through Gov't Spending

Following President Lee Jae-myung's election win last week, one of the biggest talking points is whether the government is going to come up with a supplementary budget.

With the current economic situation, how much spending by the government is feasible and necessary is a question, but President Lee has been adamant about spending more.

We have our economic correspondent, Kim Do-yeon, in the studio with us to give us more details.

Now, Do-yeon, since a supplementary budget is coming, it's not a question anymore.

That's right, Dami.

First, it's been a bit more than a week, and Lee has been focusing on the economy.

He, in fact, signed his first executive order to kick off an emergency economic response task force and met with them twice.

On top of this, his first public appearance outside of the presidential office was his visit to the Korea Exchange yesterday.

Now, let's listen to his acceptance speech, and see how he's trying to boost the economy.

Now, notice he says the "nation's finances."

So, we know government spending will increase.

Before we get to it, let's also break down where the economy stands right now, as Lee called the current situation a "recession."

Looking at the most recent data

This comes against the backdrop of South Korea's economy struggling, with the Korea Development Institute labeling the current situation "subdued."

For the first quarter, the nation's economy shrank.

The country's gross domestic product from January to March shrank by point-two percent on quarter, unchanged from an estimate in April.

Sectors like construction and services are struggling especially.

2. Right, so if there is a supplementary budget to tackle this, what can we expect? And, we know a speedy passing of the budget bill is expected as well.

That's right, Dami, first and foremost, unlike the previous government, Lee has the backing of the parliament.

Lawmakers from the DP are calling for at least 20 trillion won or 14.5 billion U.S. dollars.

Let's take a listen to the then floor leader of the DP addressing this.

"We'll introduce a supplementary budget to ease the burden on people's daily lives and deliver policies that make a real difference. At the same time, we won't stop investing in South Korea's future."

The primary focus, just because this will affect everyone, seems to be boosting domestic spending.

Now to achieve this, Lee has been for some time now calling for a universal cash payout for 250,000 Korean won for everyone.

This could be a form of local currency as well.

Some lawmakers also call for selective distribution.

Now, this is something that will help the service sector, especially.

We saw a drop in jobs in the hotels and restaurant sector for the first time in 15 months and the biggest drop since COVID-19.

But domestic spending could help this.

"Providing payments in the form of local currency can help boost the regional economy, so we could see a temporary increase in spending—particularly in sectors like services, lodging, and dining—which may lead to a slight uptick in employment.

3. Right, but are there concerns that this could lead to inflation if some sort of cash is distributed?

That's probably the biggest concern for some of the opposing lawmakers.

However, the Bank of Korea also agrees that boosting domestic spending is more urgent and a speedy supplementary budget is needed.

On top of this, even with this second supplementary budget of the year, there won't be much of an impact on inflation.

The bank did refrain from saying the right amount of money for the budget, but it did warn, of course, that too much will hurt the nation's economy later.

This came through a written statement to a liberal lawmaker's questions today.

4. Right, now, the supplementary budget isn't just about this. It will also deal with certain industries, as the former floor leader said about the nation's future.

That's right. There are certain industries that need help.

One of the most struggling industries right now is the construction sector.

It has been shrinking for some time.

Take a listen to an expert on why it's so important to support this sector.

"In construction, every 1 billion won in revenue creates around 12 jobs. It's an industry where working-class people—those who rely on labor to make a living—benefit the most."

In addition, there needs to be investments made to ensure that industries struggling from U.S. tariffs can survive the hard times.

This includes steel and auto makers.

Plus, sectors like AI need consistent development, and funds could be used to make sure the nation's strategic industries don't lag behind.

Alright Do-yeon, thanks so much for coming in today.

Appreciate it.