South Korea proposes $8.6 billion budget to tackle wildfire fallout, trade tensions

South Korea has proposed a supplemental budget totalling 12.2 trillion won ($8.6 billion) to bolster key industries and aid in domestic disaster recovery, as trade tensions with the United States escalate.

The budget includes a significant 3 trillion won ($2.25 billion) dedicated to disaster prevention and recovery efforts, following a series of devastating wildfires that recently swept parts of the country, marking some of the worst in South Korea’s history, Caliber.Az reports via foreign media.

In addition, the government plans to allocate 4 trillion won ($3 billion) to ease financial pressure on households, and 4.1 trillion won ($3.1 billion) to reinforce high-tech sectors and reduce vulnerabilities arising from global trade instability.

The supplementary budget could raise South Korea's GDP growth by 0.1 percentage point, according to Second Vice Finance Minister Kim Yoon-sang, who spoke at a press briefing.

The Bank of Korea echoed that estimate, with Governor Rhee Chang-yong stating that the 12 trillion won ($8.6 billion) budget would offer only a limited boost to growth due to its relatively modest size.

Rhee also warned that the central bank may need to lower its annual growth forecast and noted that Korea's economy may have contracted in the first quarter.

The Bank of Korea had already revised its 2024 growth outlook down to 1.5% in February, from 2.3% the previous year, citing increasing pressure from US trade tariffs, which are expected to drag on Korean exports — a key pillar of the country’s economy.

While Rhee declined to suggest how large the budget should be, he stressed the importance of keeping it as a one-time measure to avoid creating long-term fiscal imbalances.

The government plans to submit the budget proposal to the National Assembly for approval on April 22.

The move comes in response to increasing trade pressure from the United States. President Donald Trump recently imposed 25% tariffs on several countries, including South Korea. However, on April 9, all nations—except China—were granted a 90-day reprieve to negotiate trade deals with Washington. During this window, they are still subject to a 10% tariff on exports to the US.

China, meanwhile, faces tariffs as high as 245% under the US administration's ongoing efforts to push for what it calls "trade fairness."

Amid this shifting trade landscape, countries have been dispatching delegations to Washington to secure agreements. This week, both the European Union and Japan held talks in the US capital. South Korea also sent its trade representatives to Washington on April 10 in a bid to secure favourable terms.

By Tamilla Hasanova