Kim Yoon-sang, Vice Minister of the Ministry of Economy and Finance, said of the "12.2 trillion won supplementary budget bill," "This is not a supplementary budget for stimulating domestic demand." He stated, regarding the impact of the supplementary budget on growth, "The expected GDP increase effect is 0.1 percentage points."
He noted, "This essential supplementary budget aims to quickly respond to urgent issues in our economy, such as damage from forest fires, enhancing competitiveness in trade and AI, and recovery and stabilization of people's livelihoods," and emphasized, "Please pass the supplementary budget in the National Assembly as quickly as possible to avoid missing the golden time."
The government held an extraordinary Cabinet meeting on the 18th to deliberate and decide on the first supplementary budget for 2025. In the briefing on the supplementary budget held the day before the Cabinet meeting's decision, in addition to Vice Minister Kim, Kim Dong-il, head of the Budget Office of the Ministry of Economy and Finance, and Song Sang-hoon, head of the Information and Communications Policy Bureau of the Ministry of Science and ICT, participated. Below is a Q&A.
―The initial planned size of the supplementary budget was 10 trillion won. What is the reason for the increase to 12 trillion won?
Kim Yoon-sang said, "On March 30, I mentioned a supplementary budget of about 10 trillion won, but the changes in circumstances were greater than expected. First, the scale of restoration from the forest fire damage exceeded the estimated damage scale. On April 3, tariffs on automobiles and steel products were announced, along with mutual tariffs by country, creating a situation where a strong response to the tariff war was necessary."
―Do you think the supplementary budget meets the requirements?
Kim Yoon-sang said, "According to the National Finance Act, the conditions for preparing a supplementary budget include: ▲ cases where damage has occurred due to disasters or emergencies; ▲ significant changes in domestic and foreign conditions have occurred, or there is a risk of such occurrences. These aspects were taken as conditions for preparing the supplementary budget."
―The Democratic Party of Korea has stated that the size of the supplementary budget should be increased to 15 trillion won. If the People Power Party agrees, will you be willing to accommodate this?
Kim Yoon-sang said, "There is absolutely no reason to say no. The scale itself is not the issue. The content and nature of the supplementary budget are important. If it aligns with the purpose of the supplementary budget we want to process urgently, we can respond flexibly and adaptively."
―There are projections for negative growth in the first quarter this year. There are already criticisms suggesting that there should have been an early supplementary budget in the first quarter.
Kim Yoon-sang said, "When we announced the '2025 Economic Policy Direction' at the beginning of this year, we stated, 'We will assess the overall economic conditions and, if necessary, seek additional measures for economic supplementation.' At that time, we said that the central government, local governments, and provincial education offices would expedite the execution of existing finances to supplement the economy. Initially, I thought it was more important to utilize available assets before considering a supplementary budget."
―Do you still maintain that this supplementary budget is not for the purpose of responding to the economy? Should it not have included measures to stimulate domestic demand? Will there be a separate plan for additional economic support?
Kim Yoon-sang said, "If this supplementary budget were for economic response purposes, the project content should change altogether to consumption, investment, and social overhead capital (SOC). Naturally, ▲ responses related to disasters ▲ tariff responses ▲ recovery and stability of people's livelihoods would have an indirect impact on the economy. However, I would like to emphasize that the objective of this supplementary budget is focused on support for disasters and emergencies, tariffs, and advanced industry, so it is not purely for economic response purposes."
It required more time to discuss a supplementary budget for economic response, so we organized it mainly around essential items. Whether to present additional economic support measures will be considered based on economic conditions and circumstances. If necessary, we plan to continue implementing various measures.
―What effect will this supplementary budget have on economic growth rate?
Kim Yoon-sang said, "This supplementary budget is expected to raise the economic growth rate by 0.1 percentage points."
―If the supplementary budget is realized, it will inevitably increase the issuance of deficit government bonds. How much additional government bond issuance do you think the fiscal authorities can tolerate in the bond market?
Kim Yoon-sang said, "Of the 12.2 trillion won supplementary budget, 4 trillion won was covered by existing global surplus funds. About 8 trillion won worth of bonds will be released into the government bond market. This scale will not have a significant impact on the government bond market."
―What problems will arise if the processing of the supplementary budget is delayed?
Kim Yoon-sang said, "For the supplementary budget to achieve its policy objectives and influence the economy, it needs to be passed quickly. If it does not pass, there may be problems in supporting recovery from forest fire damage, and the response to disasters and emergencies may become difficult due to a lack of reserve funds included in the supplementary budget."
―Concerns over revenue shortfalls have already been raised. Do you believe there is no need to adjust revenue?
Kim Yoon-sang said, "It is too early to decide how much revenue adjustment will take place or if it is necessary. Major tax items such as comprehensive income tax final returns, value-added tax, and corporate tax must be confirmed to estimate this accurately, so it is difficult to discuss this necessity or scale at this point."
―It was mentioned that 1.4 trillion won will be invested to rapidly respond to additional restoration needs from forest fires, summer typhoons, and heavy rainfall. Some of the reserves cut by the National Assembly last year have only been supplemented; what is the reason for this?
Kim Yoon-sang said, "According to the National Finance Act, general reserves are set within 1% of the total budget of the general account, and purpose reserves are reflected as needed based on circumstances. Since four months of the year have already passed, I estimated and reflected the necessary reserve fund scale considering that aspect."
―The urgency of AI investment has been a topic for some time. What is the rationale and background for including this in the supplementary budget rather than the regular budget?
Kim Yoon-sang said, "According to the 2025 main budget, 1.8 trillion won will be invested in AI, an amount that represents a 20% increase from the previous year. However, the reason this was included in the supplementary budget is that since the inauguration of the Donald Trump administration, the United States has announced AI investment plans exceeding 700 trillion won, the EU has announced plans exceeding 300 trillion won, and China has unveiled DeepSeek. Taking into account the intensification of global competition surrounding AI, relevant ministries warned that if we do not secure GPUs early, we would fall behind by 2 to 3 years compared to other countries, and there were strong requests to increase the supplementary budget, which was reflected in it."
―Are the measures for forest fires merely closing the barn after the cows are lost?
Kim Dong-il said, "We have been continuously deploying two new helicopters each year and have been working to expand the number of forest fire extinguishing personnel. However, this time, during the forest fire incidents, additional vulnerabilities were discovered, and we judged that it was essential to significantly reinforce them. The government has invested so far, but we have learned how much our countermeasures against such large-scale and new disasters are worth. Investments will continue to be made accordingly in the future."
―There are many forecasts suggesting that the dollar will continue to weaken, and the exchange rate will decline. Why are you issuing foreign currency bonds denominated in won?
Kim Dong-il said, "Under this year's main budget, the planned issuance of won-denominated foreign currency bonds is 20 trillion won, and the issuance of foreign currency foreign currency bonds is 1.7 trillion won. Since the amount of won-denominated foreign currency bonds is large, I believe we need to reduce it from 20 trillion won to 17 trillion won and increase the foreign currency bonds from 1.7 trillion won to 3.3 trillion won. This is not a prediction of exchange rate increases or decreases, but part of the process to maintain balance."
―The consolidated fiscal balance without social security fund has exceeded 3% of GDP again. Were there any criticisms from credit rating agencies? I wonder what direction you can maintain fiscal rules in the future.
Kim Yoon-sang said, "Credit rating agencies evaluate whether our fiscal soundness can be managed from a medium-term perspective, so it does not have a significant impact on the credit rating. We will continue to strive for the introduction of fiscal rules, and if discussions about fiscal rules take place in the Strategy and Finance Committee of the National Assembly, the government also plans to actively participate in it."
Some argue that if fiscal rules are adopted, focusing solely on fiscal soundness will hinder the effectiveness of fiscal policies, which is not true. Even if fiscal rules are implemented, if they meet the conditions for preparing a supplementary budget, the application of fiscal rules is exempted, demonstrating that the implementation of fiscal rules and the role of fiscal policies are not related at all.