South Korea may expand its supplementary budget beyond the initial plan as Deputy Prime Minister and Minister of Economy and Finance Choi Sang-mok signaled flexibility in handling fiscal measures amid deepening recessionary pressures.

Speaking to journalists in Washington D.C. on Friday (local time), where he was attending the International Monetary Fund (IMF) and World Bank (WB) spring meetings, Choi indicated the government’s openness to additional spending.

“Given that recent economic indicators have not been favorable, I believe the government must respond flexibly if the proposed projects align with the principles we have outlined,” Choi said, adding that “speed is of the essence.”

Under Korean law, any increase in either the regular or supplementary budget requires the consent of the Ministry of Economy and Finance. With the Democratic Party of Korea calling for a larger package, the supplementary budget could exceed the original 12.2 trillion won ($8.5 billion) proposed by the government.

Choi’s willingness to expand the budget reflects growing concern over the economy’s negative growth in the first quarter of 2025, even before the full effects of new U.S. tariff measures were realized. Fears are mounting that growth could further weaken in the second quarter of thd year when the 25 percent tariffs on automobiles, steel, and aluminum, along with the 10 percent base reciprocal tariffs, begin to have a greater impact.

Even if the supplementary budget is expanded by about 3 trillion won to around 15 trillion won, the national debt-to-gross domestic product (GDP) ratio and the fiscal deficit ratio would not significantly deteriorate. Based on the initial supplementary budget plan of 12.2 trillion won, the national debt-to-GDP ratio would rise by only 0.2 percentage points compared to the original budget. An additional 3 trillion won increase would lift it by just another 0.1 percentage point.

Addressing concerns over rising political uncertainty should Prime Minister and Acting President Han Duck-soo run for president, Choi expressed hope that political stability would be maintained to safeguard the nation’s external credibility. His comments reflect concerns that international credit rating agencies could interpret a potential leadership vacuum as a sign of instability.

Bank of Korea Governor Rhee Chang-yong, who is also in Washington, voiced concern during a separate press briefing that the annual growth forecast for Korea could be revised downward from the current 1.5 percent following the first-quarter contraction. Commenting on the real GDP, which fell 0.2 percent from the previous quarter, Rhee said the figure was “within the expected range, but on the weaker side.”

Rhee emphasized that the Bank of Korea is not refraining from interest rate cuts but merely adjusting the pace, noting that the central bank has already lowered rates three times. He highlighted the need for a cautious and gradual approach amid heightened economic uncertainty, likening the situation to moving slowly through a “dark tunnel” where visibility is limited.

On the tariff war triggered by U.S. President Trump, Rhee said global economic uncertainty would only ease once the U.S.-China conflict is resolved.

“Whether the scenario involves reciprocal tariffs continuing indefinitely or tariffs on countries other than China being eliminated after 90 days, the impact on growth was almost identical,” Rhee explained. “The sharply higher tariffs against China, combined with China’s retaliatory measures, effectively offset any benefits from tariff exemptions for other countries.”

Regarding the agreement at the U.S.-Korea trade talks to address currency issues separately between the U.S. Treasury Department and Korea’s Ministry of Economy and Finance, Rhee assessed the move positively, saying that it is preferable for experts to handle currency discussions to limit potential political intervention.

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