South Korea plans to increase budget spending to boost economy

The Ministry of Economy and Finance plans to spend 346 trillion won ($266 billion) on the budget for the first six months of this year, the ministry said in a statement. The announcement comes after the government pledged to spend about 383 trillion won ($294 billion), or 60 percent of its annual budget, in the January-June period to support the domestic economy .

As of the end of February, the central government, local governments, and education sector had spent 92.4 trillion won on the state budget, up 10.2 trillion won from the same period last year. Of this, the central government spent 49.5 trillion won; local governments spent 41.1 trillion won, while the education sector spent 1.8 trillion won.

The ministry said the plan aims to address risks associated with the economic downturn, and called on relevant agencies to join forces to speed up the plan's implementation.

According to the Ministry of Economy and Finance, the total investment amount deployed by state-owned organizations has reached 7.4 trillion won as of February 2023, accounting for 21.3 percent of the total 34.8 trillion won set for the January-June period.

As of February, South Korea had also spent 430 billion won on private sector investment projects, accounting for about 19.5 percent of the total 2.21 trillion won planned for the period.

Statistics Korea said the consumer price index (CPI) in February rose 4.8 percent year-on-year, down from the 5.2 percent increase recorded in the previous month. However, the inflation rate was still above the Bank of Korea's (BOK) medium-term target of 2 percent. This is also the 23rd consecutive month that South Korea's inflation has been above this target.

The sharp increase in inflation is attributed to rising energy and food costs due to limited supplies due to the impact of the Russia-Ukraine conflict and increased domestic demand as the economy begins to recover from the COVID-19 pandemic.

South Korea continues to face rising inflationary pressures in the coming months. In response, the BOK has raised interest rates seven times since April 2022 to curb inflation.

However, last February, the Bank decided to keep the base interest rate at 3.5% amid growing concerns that tightening monetary policy could impact economic growth./.

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