SEOUL, August 30 – The South Korean government has announced a comprehensive multi-billion dollar economic stimulus package aimed at navigating the dual challenges of persistent inflation and slowing economic growth. The plan places a strong emphasis on providing targeted support for the nation's small and medium-sized enterprises (SMEs), which are considered the backbone of the domestic economy.
The announcement comes as Asia's fourth-largest economy grapples with sluggish export figures and consumer spending dampened by higher borrowing costs and inflation. The Ministry of Economy and Finance detailed the initiative, which is valued at approximately ₩25 trillion (around $18 billion USD), as a preemptive measure to inject vitality into the economy and shield its most vulnerable sectors.
"Our economy is at a critical juncture, facing headwinds from both domestic and global factors," said Minister of Economy and Finance, Choi Sang-mok, in a press briefing in Seoul. "This package is designed not as a short-term fix, but as a strategic investment to strengthen our economic fundamentals. By focusing on small and medium-sized businesses, we are supporting job creators and fostering sustainable growth from the ground up."
The stimulus package includes a multi-pronged approach to assist SMEs struggling with high operational costs and tight credit conditions:
Financial Liquidity and Loan Guarantees: A significant portion of the funds will be allocated to providing low-interest loans and expanding credit guarantees for SMEs, making it easier for them to secure necessary funding for operations and investment.
Energy and Utility Subsidies: To combat rising overheads, the government will introduce subsidies to help businesses offset high electricity and fuel costs, a major pain point for manufacturing and service industries.
Tax Incentives and Deregulation: The plan includes targeted tax breaks for companies that increase investment, retain and expand their workforce, and adopt new technologies. The government also pledged to streamline regulations to reduce the administrative burden on small businesses.
Boosting Innovation and Competitiveness: A dedicated fund will be established to support the digital transformation and R&D efforts of SMEs, helping them to enhance their competitiveness in both domestic and international markets.
Economists see the move as a delicate balancing act. The government is attempting to stimulate business activity without exacerbating inflationary pressures, which have remained stubbornly above the central bank's target. The targeted nature of the support for SMEs, rather than broad cash handouts to consumers, is intended to boost the productive capacity of the economy.
The initiative has been cautiously welcomed by business federations, who have long called for government support to navigate the difficult economic climate. However, its ultimate success will depend on swift implementation and its ability to meaningfully improve business sentiment and investment in the coming months.