[2024 Economic Policy] 'Record High' Facility Investment 52 Trillion Won · Trade Finance 355 Trillion Won... All In on Livelihoods

The government has set "a vibrant livelihood economy" as the main direction of its New Year economic policy and is launching efforts to "revive livelihoods" through the largest-ever trade finance of 355 trillion won, supply of 52 trillion won in facility investment funds, and tariff exemptions and reductions on 21 types of fruits. This year’s economic growth rate is expected to improve to 2.2% compared to last year, but it may take time for the public to feel the effects due to prolonged high inflation and high interest rates.

On the 4th, the government announced the "2024 Economic Policy Direction" containing these details. Kim Byung-hwan, First Vice Minister of the Ministry of Economy and Finance, stated, "We will support trade finance at the largest-ever scale of 355 trillion won aiming to achieve $700 billion in exports, extend the temporary investment tax credit for facility investments by one year, and expand the temporary tax credit on the increase in general research and development (R&D) investments by 10 percentage points."

Accelerating Export Recovery with 355 Trillion Won Trade Finance... 52 Trillion Won Facility Investment Funds to Boost Investment Rebound

To support the early achievement of the annual export target of $700 billion, the government will supply 355 trillion won in trade finance, an increase of 10 trillion won from the previous year. Two-thirds of the marketing support budget will be concentrated in the first half of the year, and the tax support package for export SMEs?including corporate tax, value-added tax, and tax audits?will be extended by one year. The government will promote the introduction of a won-based payment system for export-import transactions and expand the export voucher budget from 144.1 billion won to 169.7 billion won.

To achieve the overseas order target of $57 billion in infrastructure and defense sectors, defense technology will be designated as a "new growth source technology" to support order expansion, and to accelerate the results of presidential sales diplomacy, a pan-government "Global Partnership Implementation Inspection Team" will be operated to ensure that the outcomes of overseas visits lead to quality job creation and domestic investment.

To stimulate an early rebound in investment, the temporary investment tax credit for facility investments will be extended for one year until the end of this year, and the tax credit rate for R&D investments will also be temporarily increased until the end of this year. For example, if a large company A invests 500 billion won annually in general R&D and adds an additional 40 billion won this year, it will receive a tax credit of 14 billion won, which is 3.2 billion won more than the credit under the existing system (10.8 billion won). To support investment rebound, facility investment funds supplied by the Industrial Bank of Korea and Korea Development Bank will increase by 2 trillion won from 50 trillion won last year to 52 trillion won. The budget for cash support for foreign investment will also be quadrupled.

Choi Sang-mok, Deputy Prime Minister for Economy and Minister of Strategy and Finance, is delivering opening remarks at the joint briefing on the 2024 Economic Policy Direction held on the 4th at the Government Seoul Office in Jongno-gu, Seoul. The briefing was attended by Park Sang-woo, Minister of Land, Infrastructure and Transport; Kim Ju-hyun, Chairman of the Financial Services Commission; Oh Young-joo, Minister of SMEs and Startups; and Jeong Byeong-geuk, 1st Vice Minister of Culture, Sports and Tourism. Photo by Jo Yong-jun jun21@

Warming Livelihoods... Lowering Inflation to 2% Range and Supporting Self-Employed and Elderly

The government has set this year’s inflation target at 2.6% and prepared various support measures to achieve 2% inflation early in the first half of the year.

First, the budget for price management, including discounts on agricultural, livestock, and fishery products and energy vouchers, will be increased by 1.8 trillion won from last year to 10.8 trillion won. To stabilize prices of fruits and processed fruit products, emergency tariff quotas will be applied in January to 21 types of fruits and processed fruit products. Tariffs on bananas, pineapples, mangoes, grapefruits, and avocados will be reduced from the current 30% to 0%, and oranges will be lowered to 10%. Tariffs on other frozen fruits such as frozen strawberries will also be temporarily reduced from 30% to 0% in the first half of the year. The application of tariff quotas on these 21 items is the largest ever. Additionally, central and local public utility fees will be frozen in the first half of the year, contributions to price stabilization will be reflected in management evaluations, and mandatory disclosure of information will be enforced when the volume of major daily necessities changes to prevent "shrinkflation."

Support will also be provided for the self-employed, elderly, and housing-vulnerable groups. To reduce housing risks such as "reverse jeonse," LH will purchase more than 10,000 multi-family units this year, and when tenants purchase the homes they reside in, acquisition tax will be temporarily reduced, and their status as non-homeowners will be maintained. Registered rental businesses with three or more properties will be allowed to transfer houses valued at up to 300 million won (200 million won in local areas). For 1.26 million small business owners, electricity bills will be reduced by 200,000 won each, and the income deduction rate for traditional markets will be temporarily increased from 40% to 80%. The elderly job support program will be significantly expanded from 880,000 to 1.03 million people, and allowances have been raised for the first time in six years. The livelihood benefit will also be increased by 13.2% for a four-person household.

Revitalizing Construction Industry with 'Second Homes'... Managing Real Estate PF Risks

Efforts will also be made to revitalize the construction industry, which was a key pledge of Choi Sang-mok, Deputy Prime Minister and Minister of Economy and Finance. The government will push for the highest-ever level (65%) of early fiscal spending in the first half of the year, including investing 26.4 trillion won in social overhead capital (SOC) projects. When existing homeowners purchase one house in population-declining areas, they will be regarded as single homeowners to activate "second homes," and "mini tourist complexes" will be created in each region to expand the local resident and visitor population. To prevent the contraction of the local construction industry, development charges outside the metropolitan area will be temporarily reduced by 100%, and school site charges by 50% this year.

The spread of real estate project financing (PF) insolvency will also be prevented. Market stabilization measures worth 85 trillion won will be supplied promptly, and liquidity support will be expanded if necessary. LH will purchase and normalize projects that have business feasibility but are experiencing temporary liquidity difficulties. Household debt will be managed to remain within 100% of GDP by 2027. When the project finance investment company (PFV) jointly funded by Korea Asset Management Corporation (KAMCO) and the private sector purchases real estate, acquisition tax will be temporarily reduced by 50%, and the one-year temporary extension of the exemption from heavy capital gains tax for multi-homeowners will be implemented.

Improving Location Regulations to Realize a Dynamic Economy... Creating Silver Towns and Encouraging Long-Term Retention of Skilled Foreign Workers for the Future

To realize a "dynamic economy," which is also the top priority policy task of the second-term economic team, the government will improve the three major location regulations: green belts, farmland, and mountainous areas. When promoting green belt deregulation projects outside the metropolitan area, the conditions for deregulation will be eased, and rationalization of farmland use will be pursued by allowing farmland use for some smart farm facilities. Mountainous areas necessary for public convenience or corporate activities will have their use expanded through discussions with the Korea Forest Service. The progress of advanced industrial clusters nationwide will be checked, and customized support will be provided at each development stage. Efforts will also be made to strengthen the competitiveness of the domestic liquor industry, including rationalizing the liquor licensing system.

A "Future Generation Vision and Mid-to-Long-Term Strategy" for future challenges will be prepared within the year, and the legislation of fiscal rules will continue. To build sustainable national pension and health insurance systems, out-of-pocket expenses for excessive medical service users will be increased, and equity between workplace and regional subscribers will be improved. The scale of foreign worker inflow will be expanded by 100,000 to meet industrial and rural demands, and measures to encourage long-term retention of skilled workers (E-7-4) will be prepared. Tax exemption will be applied to subsidies for workplace daycare operation costs, and a task force (TF) involving related ministries will be formed to devise plans to revitalize silver towns. The Youth Leap Account will be exempt from tax if withdrawn early after three years of subscription or due to marriage or childbirth.

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