The government's 25.2 trillion won supplementary budget could raise economic growth by up to 0.36 percentage points over the next four quarters, according to a new forecast.
Kim Jin-wook, an economist at Citibank, said in a report on Thursday that "the additional fiscal spending of 25.2 trillion won, equivalent to approximately 0.89% of Korea's gross domestic product, is projected to lift economic growth by 0.18 to 0.36 percentage points over the next four quarters."
A day earlier, the government approved a supplementary budget package totaling 26.2 trillion won, comprising 25.2 trillion won in additional fiscal spending and 1 trillion won in government bond repayments. The government forecast the supplementary budget would boost the growth rate by 0.2 percentage points.
"If the National Assembly passes the supplementary budget by mid-April, its positive effects will be concentrated mainly in May and June," Kim said.
Citi maintained its forecast that the Bank of Korea (BOK) will raise interest rates twice in the second half of the year.
"There is a high likelihood that the BOK's Monetary Policy Board will hold the base rate at its meeting on the 10th," Kim said. "BOK governor nominee Shin Hyun-song could signal rate hikes as early as the May Monetary Policy Board meeting, and beginning in July, the central bank is expected to raise rates twice, bringing the rate to 3.00% by year-end."
