The South Korean government could draw up a supplementary budget of up to 15 trillion won ($10.5 billion) to offset the impact of high oil prices, according to Citi.
Kim Jin-wook, economist at Citi, said in a report on the 10th that "the government is expected to compile a supplementary budget of up to 15 trillion won in March or April." He added that the budget "is likely to be executed before the June 3 local elections."
The 15 trillion won represents approximately 0.53% of GDP and could boost economic growth by 0.11 to 0.21 percentage points over the next four quarters, the analysis showed.
Citi expects the funding to come from the semiconductor boom. Excess corporate taxes from the semiconductor sector and capital gains tax revenues could provide financing without additional government bond issuance, the bank said.
The supplementary budget is expected to focus on supporting low-income households and the transportation industry, which face heavy burdens from high oil prices. Citi suggested the package may include oil price-linked rebates and subsidies for low-income groups and the transportation sector, as well as energy assistance for vulnerable populations.
The government is also considering introducing a gasoline price cap alongside fuel tax cuts. Citi estimated approximately 6.7 trillion won in fiscal spending would be needed to compensate refiners for losses arising from such measures.
President Lee Jae-myung instructed the cabinet to review a supplementary budget including direct support for fuel consumers at a cabinet meeting the same day.
Citi maintained its 2025 economic growth forecast for South Korea at 2.3%. First-quarter growth is expected to reach 0.9% quarter-on-quarter, supported by a recovery in the semiconductor sector.