The government will inject 18 trillion won through fiscal, public, and policy finance to bolster the economy. In particular, it plans to accelerate the recovery of domestic demand with a swift execution of fiscal measures on an 'unprecedented scale.' It also plans to advance the payment of youth job incentives and the hiring period for senior jobs, and provide electric vehicle subsidies more than a month earlier than before. An expansion of income tax deductions for additional consumption in the first half is also being pursued.
Along with this, the government will accelerate economic recovery through measures such as promoting domestic tourism and expanding public housing construction. Additionally, it will allow each spouse in dual-income weekend families to receive a monthly rent tax credit to alleviate housing costs. The government plans to increase the welfare budget by 4.7% this year to provide robust protection for low-income groups. Support for the aging population and the disabled will also be strengthened.
On the 2nd, the government, led by Acting President Choi Sang-mok, who also serves as Deputy Prime Minister and Minister of Strategy and Finance, held an expanded economic ministers meeting to finalize and announce the '2025 economic policy direction.' The core of this policy direction is to prioritize the recovery of the people's livelihood economy, aiming to revive the overall economic vitality through economic stimulation and support for vulnerable institutional sectors.
◇ Advancing the timing for receiving support funds significantly... 'Income deductions for increased first-half consumption'
To stabilize the economy and the people's livelihood, the government plans to quickly invest a total of 18 trillion won through fiscal measures, public institution investments, private investments, and policy finance. Specifically, it aims to achieve an additional economic boost effect of more than 5 trillion won compared to last year through the largest-ever swift execution in the first half.
For the recovery of the people's livelihood economy, this year the government plans to swiftly execute the 11.6 trillion won budget allocated before the start of the fiscal year. The government's pre-fiscal year budget allocation was conducted from 2016 to 2022, but it was not done in the previous two years.
To expedite fiscal execution, the government will greatly simplify execution procedures and significantly shorten the time it takes for the support funds to reach the beneficiaries. For instance, while the youth job jump-start incentives were paid on Jan. 12 last year, this year it can be paid as early as Jan. 3. Also, while subsidies for the purchase of electric and hydrogen vehicles were paid in the fourth week of February last year, this year, they will be paid in the third week of January, aiming to fill the early-year gap in electric vehicle purchases.
To boost consumption vitality, the government is pursuing an expansion of income tax deductions for additional consumption in the first half. If consumption increases by more than 5% compared to the previous year, 20% of the increase will be recognized as an additional income tax deduction, with a separate limit allowing deductions up to 1 million won.
In the first half of the year, the special consumption tax on vehicles will be temporarily reduced by 30%. Additional discounts will also be offered upon replacing old cars. Corporations that sell electric vehicles will provide additional subsidies if they offer their own discounts, further reducing consumer burdens. For example, if a corporation discounts an electric vehicle priced at 44 million won by 4 million won, the government will provide an additional subsidy of 1.2 million won, allowing a total discount of 5.2 million won. However, this is only applicable to vehicles released between Jan. 3 and Jun. 30.
To reduce the burden of buying appliances for vulnerable groups and large families, the government plans to expand rebate support for high-efficiency appliance purchases. The rebate rate for disabled individuals, national patriots, and basic livelihood guarantee recipients will be increased from 20% to 30%. For large families, families with newborns, and extended families, the rebate rate will be increased from 10% to 15%. For example, if a large family purchases an air conditioner worth 2 million won, the rebate will increase from 200,000 won to 300,000 won.
◇ Expanding domestic demand by promoting domestic tourism
Various programs are also being promoted to boost domestic tourism. The government will distribute 1 million new coupons worth up to 30,000 won each for accommodations outside the metropolitan area. The vacation support project for workers in small and medium-sized enterprises will be expanded to twice its current size.
The government will launch the Korea Grand Sale in January, followed by a series of events throughout the year such as the Partnership Festival, Duty-Free Festa, and Korea Sale Festa to boost consumption and tourism demand simultaneously. To attract more foreign tourists, the government decided to extend the temporary waiver period for the electronic travel authorization (K-ETA) by one year, applying it until December 2025.
In particular, to stimulate visits by Chinese group tourists, the government is considering a temporary visa-free pilot program. Additionally, visa issuance fees for group tourists from six countries, including China, Vietnam, the Philippines, Indonesia, Cambodia, and India, will be exempted until December this year.
Measures have also been introduced to invigorate the construction economy. The government plans to begin construction of a total of 138,000 public and publicly supported private rental dwellings within this year. It will announce new residential site candidates for 30,000 dwellings centered around the capital area in the first half. For previously announced new sites, such as 20,000 units in Seocho, Seoul, site designation will be completed by the first half of 2026.
For social overhead capital (SOC) projects like highways, high-speed railroads, and new airports, the government aims to execute 70% by the first half and 52% by the first quarter to expedite economic recovery. To make construction costs more realistic, a three-part package to adjust construction costs for public projects will be introduced, and the purchase price for private rental dwellings will increase by 10%. Additional expenses will be reflected in the sale price assessment to reduce the burden on private construction companies.
To activate housing transactions and reduce tax burdens, the government decided to extend the exclusion of capital gains tax surcharges for multi-homeowners by one year, applying it until May 2026. This aims to promote stability and stimulate transactions in the real estate market.
Additionally, tax burdens on local real estate will be eased. The basis of the published price for special cases of the comprehensive real estate tax for single-home households will be raised from 300 million won or less to 400 million won or less. For acquiring tax surcharges exclusion, the standard for low-priced housing will also be eased from a published price of 100 million won or less to 200 million won or less to support the activation of local real estate transactions.
◇ Reducing tax burdens for weekend families and expanding customized support for the disadvantaged
To reduce the burden of housing costs, the government will allow dual-income couples living separately to each receive a monthly rent tax credit. The maximum deduction limit per household is 10 million won. Currently, if the head of the household receives a monthly rent tax credit, the spouse cannot receive it, but to improve this, the situation of weekend families will be reviewed and reflected in this year's tax law amendment.
The government will issue 5.5 trillion won worth of gift certificates, on an unprecedented scale, and significantly expand both the discount rates and places of use. During the peak Lunar New Year shopping period, from Jan. 10 to Feb. 10, the discount rate for digital gift certificates will be increased from the current 10% to 15%. In addition, 15% of the amount spent digitally will be reimbursed as digital gift certificates, with a reimbursement limit of up to 20,000 won per person. For example, if a consumer purchases goods worth 130,000 won with gift certificates, they can receive a maximum discount benefit of 40,000 won (30%).
The government plans to increase the welfare budget by 4.7% this year to provide robust protection for low-income groups and to enhance support for the aging population and the disabled. By raising the livelihood benefit and expanding the pool of beneficiaries, it plans to reduce welfare blind spots by easing property criteria and the criteria for financial supporters.
There are also measures for guaranteeing income in old age and expanding jobs for seniors. The number of jobs for seniors will increase from 1.03 million to 1.1 million. The basic pension will be raised from the current 335,000 won per month to 344,000 won. Over 90% of the direct job recipients, including senior job programs, will be rapidly hired within the first quarter. The government will expand the number of disability activity support targets from 124,000 to 133,000 and conduct a pilot project for emergency care services for severely developmentally disabled individuals.