Supplementary Budget Gains Momentum with 4.0% Growth Outlook

Bank of Korea Raises Growth Forecast by 1.0%p After 3 Months... Government Says "In Line with Major Institutions' Consensus"
Focus on 'Second Half Economic Policy Direction' to Be Announced Next Month... 'Second Supplementary Budget' Formation in Sight

[Sejong=Asia Economy Reporters Kim Hyunjung and Son Seonhee] As the Bank of Korea forecasts this year's Gross Domestic Product (GDP) growth rate at 4.0%, attention is focused on the government's economic policies that will drive the economic recovery. The Ministry of Economy and Finance is likely to raise the growth rate forecast in the ‘2021 Second Half Economic Policy Direction (Hagyeongjeong)’ to be released next month. Additionally, whether an additional supplementary budget (Chugyeong) will be prepared to accelerate growth is also drawing attention.

According to government officials on the 27th, the Ministry of Economy and Finance is expected to announce a real GDP growth rate exceeding the Bank of Korea’s 4.0% GDP growth forecast for this year through the Hagyeongjeong next month. The government’s forecast carries a declarative meaning expressing its determination for economic recovery, and earlier, President Moon also declared the goal of achieving a ‘4% growth rate’ in his 4th anniversary inauguration speech on the 10th.

The government also appears to accept the Bank of Korea’s forecast announced on the same day. Regarding the Bank of Korea’s unusual upward revision of the growth forecast by 1 percentage point in just three months, a Ministry of Economy and Finance official explained, "It seems to comprehensively reflect the recent global economic recovery, the global semiconductor market conditions, and improvements in external conditions," adding, "It is within the consensus range of forecasts released by other institutions recently." He further stated, "The government will identify tasks to achieve growth above 4% and prepare and proceed with the Hagyeongjeong accordingly."

To accelerate the recovery trend in the growth rate based on export recovery, expanding domestic demand through private consumption is essential. In particular, consumption recovery centered on face-to-face service industries such as travel, tourism, and accommodation, which were sharply contracted due to COVID-19, is key, and this inevitably links to the quarantine situation. If the quarantine situation improves faster than expected, the government is highly likely to announce separate fiscal policies as a ‘priming water’ measure in addition to the Hagyeongjeong. The payment of nationwide disaster relief funds to stimulate consumption and the preparation of a second supplementary budget are also expected to be considered.

A senior government official said, "It is necessary to review how to revitalize businesses subject to gathering bans and operating restrictions due to quarantine measures," adding, "If the growth forecast rises, the necessity of preparing a supplementary budget will be reviewed to recover domestic demand."

This content was produced with the assistance of AI translation services.