If a new government is formed through the early presidential election on June 3, it is expected that a supplementary budget will follow. This is due to the presidential candidates announcing promises that will cost tens of trillions of won to secure votes, along with the need for economic stimulation.
In fact, Lee Jae-myung, the presidential candidate of the Democratic Party of Korea, mentioned the supplementary budget as a short-term measure for the economic downturn during the presidential candidate debate held on the 16th. All governments that have been established since 2000 have pursued a supplementary budget in the early days of their administration.
According to financial authorities on the 21st, every government that has come into power since the 2000s has held a cabinet meeting for the supplementary budget within 100 days of the president's inauguration. The cabinet meeting is a necessary step before submitting the supplementary budget plan to the National Assembly. The time taken from the day of presidential inauguration to the convening of the cabinet meeting that decided on the supplementary budget was longest during the Roh Moo-hyun administration, taking 100 days, and it has gradually shortened since then. The Yoon Suk-yeol administration took just two days.
The supplementary budget plan approved in the cabinet meeting has passed the National Assembly in all cases except during the Lee Myung-bak administration. In 2008, the Lee Myung-bak administration held the cabinet meeting only 57 days after the presidential inauguration and pushed for a supplementary budget citing economic recovery, but then Korean National Party Policy Committee Chairman Lee Hwan-koo blocked it. His argument was that the economic downturn should be alleviated through tax cuts and deregulation instead of a supplementary budget. As a result, the first supplementary budget under the Lee Myung-bak administration was made a year after the inauguration.
Governments established since 2000 have pursued supplementary budgets for the purpose of economic stimulation. The size of the supplementary budget was largest under the Yoon Suk-yeol administration. The Yoon Suk-yeol administration prepared a supplementary budget of 59.4 trillion won, stating it would support overcoming COVID-19 and stabilize livelihoods. With this money, the government provided disaster relief funds of 6 million to 10 million won each to small business owners and reinforced local government finance. This amount is approximately 14 times larger than the first supplementary budget of the Roh Moo-hyun administration (4.1775 trillion won) and more than five times larger than that of the previous Moon Jae-in administration (11.2 trillion won).
Given that there have been no exceptions, the new government that will be established next month is also likely to handle the supplementary budget. Major candidates, including Lee Jae-myung of the Democratic Party of Korea and Kim Moon-soo of the People Power Party, have already announced several cash support pledges.
The ruling Democratic Party is also positive about the supplementary budget. The party stated that the first supplementary budget (13.8 trillion won) passed earlier this month does not even meet the minimum level of economic defense and that an additional 20 trillion won is necessary.
The problem is that the national treasury is not sufficient. It is difficult to secure funding through expenditure restructuring and increased revenue. Expenditure restructuring has its limits, and for tax revenue to be high, economic growth must support it, but predictions suggest that South Korea's economic growth rate could be at 0% this year.
The Korea Development Institute (KDI), a national research institute, recently lowered its economic growth forecast for this year from the previous 1.6% to 0.8%. Ultimately, the scenario of issuing government bonds is likely. During the previous supplementary budget, 70%, or 9.5 trillion won, was funded through government bonds. As of the end of March this year, the central government's debt balance was 1,175.9 trillion won.