The South Korean government has proposed an additional budget of approximately 170 billion U.S. dollars to mitigate the economic impact of Middle East energy disruptions and bolster growth. The Ministry of Economy and Finance announced on Tuesday that it has drafted a supplementary budget bill worth 26.2 trillion won, equivalent to 172.6 billion U.S. dollars, which will be submitted to the National Assembly for approval later in the day.
In a statement, the ministry emphasized that additional fiscal stimulus is necessary due to surging oil prices driven by supply disruptions and heightened uncertainty stemming from Middle East conflicts, which are placing increased pressure on households. The additional spending is intended to alleviate burdens on low-income families, small businesses, young people, and other vulnerable groups, as well as exporters facing rising transportation and logistics costs.
A significant portion of the supplementary budget, exceeding 10 trillion won, will be allocated to fund the government’s temporary price cap on petroleum products and to distribute energy vouchers and discount coupons. The new stimulus comes as rising oil prices and supply disruptions along key global energy transit routes, such as the Strait of Hormuz, have intensified concerns over stagflation since the escalation of Middle East conflicts in late February.
As a major energy importer, South Korea relies heavily on oil and natural gas from the Middle East. Last week, the Organisation for Economic Cooperation and Development revised its growth forecast for South Korea in 2026 downward from 2.1% to 1.7%, while raising its inflation projection from 1.8% to 2.7%.
The ministry stated that the supplementary budget will be financed through tax surpluses and national funds. The government does not plan to issue new bonds to cover the additional expenditure and intends to use part of the revenue to repay existing public debt. After partial debt repayment, the government’s overall debt-to-GDP ratio is expected to decrease slightly from the current 51.6% to 50.6%.
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