S. Korea is to give out cash to lift economy

(MENAFN) South Korea is set to implement a broad cash distribution program aimed at stimulating consumer spending and lifting its struggling economy. Government officials are describing the initiative as a system of “consumption coupons,” designed to energize domestic demand.

The plan is a key part of a supplementary budget worth 31.8 trillion won (around $23.3 billion), which was approved by the country’s National Assembly. The program will begin on July 21 and continue until September 12.

“We will ensure thorough preparations for the rollout of these payments so that they can serve as a catalyst for economic recovery by boosting consumption and supporting those in need,” said Vice Interior Minister Kim Min-jae, who is leading the interagency team managing the initiative.

Under the program, every citizen residing in South Korea as of June 18 will receive a one-time payment of 150,000 won (approximately $110). The funds will be distributed via credit or debit cards, prepaid cards, or through gift certificates issued by local authorities.

Additional aid is designated for specific groups. Households near the poverty line and single-parent families will receive 300,000 won ($220), while individuals on the basic living allowance will be granted 400,000 won ($290). Residents in rural areas will be eligible for an extra 50,000 won to help address regional imbalances, as stated by the Interior Ministry.

A second round of payments is scheduled from September 22 to October 31, targeting the lower 90% of income earners. This phase will offer 100,000 won (about $73), with eligibility determined based on health insurance contribution levels. Specifics for this round are expected to be released in September.

South Korea narrowly avoided entering a technical recession in 2024, with economic growth faltering in the year’s second half. The downturn followed a contraction in the second quarter and a limited rebound in the third, amid a backdrop of domestic political turmoil. The crisis culminated in the impeachment of former President Yoon Suk Yeol, who had briefly declared martial law in December before being removed from office on charges of insurrection.

The newly inaugurated President Lee Jae-myung, who assumed office on June 4, introduced a wide-ranging stimulus strategy that includes direct cash payments, digital vouchers, and major investment in artificial intelligence infrastructure as part of efforts to restart growth.

Still, some economic experts are voicing concern over the potential for inflation and the long-term impact on public finances. The Finance Ministry intends to finance the stimulus through new borrowing, with projections showing a fiscal deficit of 4.2% and national debt rising to 49.1% of GDP.

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