Seoul, June 18 The government's additional supplementary budget is expected to have a limited impact on inflation and targeted support, rather than universal aid, would be more efficient, the central bank chief said on Wednesday.
Bank of Korea (BOK) Gov. Rhee Chang-yong made the remarks during a press conference in Seoul to review this year's inflation target, as the government was to unveil a second supplementary budget of around 20 trillion won (US$14.58 billion), following the 13.8 trillion-won package approved by the National Assembly in May.
"I have long believed that a supplementary budget would make a significant contribution to economic growth while having a limited impact on inflation," Rhee said, reports Yonhap news agency.
BOK Deputy Gov. Kim Woong told reporters that a supplementary budget of around 20 trillion won would raise next year's consumer prices by approximately 0.1 percentage point, while its effect on this year's inflation would be minimal.
President Lee Jae Myung has advocated for an expansionary fiscal policy to spur economic growth and improve public livelihoods, which have been dampened by sluggish domestic demand and the aggressive tariff measures introduced by the Donald Trump administration.
According to government and ruling Democratic Party officials, the proposed supplementary budget will include universal cash payments to all citizens, along with additional aid for low-income and vulnerable groups.
"In terms of fiscal efficiency, targeted support is more effective than universal support in assisting vulnerable groups, such as self-employed and small business owners," Rhee said.
The potential impact of the extra budget on inflation and economic growth will be assessed once the government releases the detailed plan, with the BOK to provide its official analysis following the rate-setting meeting in July, he added.
Speaking of the overall inflation level, the governor said that perceived inflation and the cost of living have remained elevated since the COVID-19 pandemic, though prices have remained stable in the first half of this year.
"Looking ahead, uncertainties remain high due to factors such as consumer price inflation and surging global oil prices caused by geopolitical instability in the Middle East. It is essential to closely monitor the interaction of various inflation drivers," he added.
Consumer prices rose 1.9 percent in May from a year earlier, marking the first time in five months that inflation has fallen below the 2 percent threshold.
But the increase in processed food prices remained high, staying in the 4 percent range for the second consecutive month. Dining-out prices also rose 3.2 percent on-year in May.
In the wake of mounting burdens on the people, President Lee last week expressed concerns over recent price hikes in everyday goods, such as instant noodles, and instructed officials to devise measures to curb inflation.
The BOK forecast consumer prices to increase by 1.9 percent this year and 1.8 percent in 2026.
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