President Lee Jae-myung declared on the 10th that "a supplementary budget is inevitable at this point," effectively formalizing the administration's commitment to additional fiscal spending. The statement marks a departure from the Blue House's previous cautious stance on budget discussions, driven by unforeseen developments in the Middle East.
At a Cabinet meeting held at the Blue House, President Lee emphasized the necessity of a supplementary budget, citing the oil price crisis triggered by Middle East tensions and the need to support vulnerable groups with fuel costs.
"If we want to provide direct support to consumers, don't we need a supplementary budget?" the president said.
"When crises arrive, the disadvantaged become more disadvantaged while upper classes tend to benefit," Lee noted. "If we uniformly reduce fuel taxes, we cannot control this tendency."
He added, "Rather, if we use the equivalent funds from fuel tax cuts to provide targeted support for ordinary citizens and struggling consumer groups, we can alleviate polarization."
Deputy Prime Minister and Minister of Finance and Economy Koo Yoon-chul responded, "We will utilize existing budgets to the fullest extent and actively consider additional measures if necessary."
President Lee also highlighted favorable conditions for the supplementary budget, stating, "Tax revenue this year appears likely to exceed projections made during the 2026 budget formulation."
Deputy Prime Minister Koo echoed the optimism, noting, "Semiconductor industry conditions have improved recently, and transaction taxes are rising due to stock market activation. We should be able to proceed with an appropriately sized supplementary budget without issuing government bonds."
The president's remarks are expected to accelerate budget preparations. The statement came just one day after Blue House Policy Chief Kim Yong-beom said the administration needed to "seriously consider" a supplementary budget.
Citi economist Kim Jin-wook projected in a report that "the government will likely formulate a supplementary budget of up to 15 trillion won during March-April and execute it 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 following four quarters, according to the analysis.
President Lee also addressed the possibility of U.S. Forces Korea assets being redeployed to the Middle East.
"While we have expressed opposition to USFK withdrawing some air defense weapons for their own military needs, the reality is that we cannot entirely prevail in having our views accepted," he said.
"Our annual defense spending is 1.4 times higher than North Korea's GDP," Lee continued. "If you ask whether this would severely impair our deterrence strategy against the North, I can tell you that is absolutely not the case."
He added, "Considering objective circumstances including our defense burden levels, defense industry development, and international military rankings, there is absolutely no cause for concern about national defense."