The Korean government announced its '2026 Second Half Economic Growth Strategy' on the 14th, establishing a new integrated market monitoring council that includes heads of economic, financial, and monetary authorities along with the Minister of Land, Infrastructure and Transport. The strategy aims to strengthen responses to 'three-high' risks of inflation, exchange rates, and interest rates. The move comes as the government adapts its macroeconomic policies to the changed economic environment following the Middle East war.
Government Establishes Integrated Risk Management Council
The government will operate an integrated market monitoring council as a comprehensive risk management system for overall market stability covering macroeconomics, financial and foreign exchange markets, and real estate. A new official ministerial-level meeting body will be established with participation from the Ministry of Economy and Finance, Bank of Korea, Financial Services Commission, Financial Supervisory Service, and when necessary, the Ministry of Land, Infrastructure and Transport. This council appears to be an expansion of the existing F4 market situation monitoring meeting, with the addition of the land ministry as the real estate authority.
Finance Ministry Plans Record 800 Trillion Won Budget for Next Year
Regarding fiscal policy, the government decided to maintain an active fiscal management stance based on favorable tax revenue conditions. Park Hong-geun, Minister of Strategy and Budget, stated at the National Fiscal Strategy Meeting held the previous day that "2027 national tax revenue is expected to far exceed the initial forecast of 412 trillion won, reaching 500 trillion won + α, the largest tax revenue in history." He added that next year's total expenditure will be organized at a record-high level of 800 trillion won range, an increase of more than 10% from this year. The government will also establish a new Future Response Fund that concentrates additional tax revenue expected from the semiconductor boom into youth, next-generation growth, regional development, and education.
Government Announces Inflation Response Measures Including Price Controls
For high inflation response, the government plans to review the removal of the petroleum maximum price system considering market conditions such as international oil prices, supply and demand situations, and public burden, and will review whether to extend additional oil tax cuts if necessary. The government will promote a 3,500 billion won discount event for all agricultural, livestock, and fishery products, expanding participating companies for agricultural and livestock products from 75 to 90. Central public utility rates including electricity and gas will be frozen in the second half, and local public utility rates will also be managed under a second-half freeze stance in cooperation with local governments.
Authorities Extend Foreign Exchange Soundness Charge Exemption
For stable foreign exchange market management, the foreign exchange soundness charge exemption will be extended for three months, and the deferment of supervisory measures for foreign currency reserve interest exemption and advanced stress tests will also be extended for six months. The government will create conditions for revitalizing deliverable forward (DF) transactions by improving offshore won accessibility, and will prepare DF-friendly reform measures for the foreign exchange soundness system during the second half. The government also successfully issued 1.7 billion euro foreign exchange stabilization bonds, preemptively securing market response capacity.
Industrial Bank Expands SME On-Lending Support to 9.6 Trillion Won
To ease interest rate burdens on SMEs and small business owners, the government will review expanding financial support for regional SMEs (including individual business owners) through reform of the Bank of Korea's financial intermediary support loans. The financial intermediary support loan is a system where the Bank of Korea provides low-interest funds (currently 1.0%) to banks in proportion to their lending performance for purposes set by the Bank. Reform of this system requires a decision by the Monetary Policy Board. The Industrial Bank of Korea will expand on-lending support, which provides loans to SMEs through commercial financial institutions using funds procured at low interest rates based on government credit, from 9.2 trillion won to 9.6 trillion won, an increase of 400 billion won. The Korea SMEs and Startups Agency decided to make efforts to minimize policy fund interest rate increases in the second half.
FAQ
What did the Korean government announce on the 14th regarding economic policy?
The Korean government announced its '2026 Second Half Economic Growth Strategy' on the 14th, which includes establishing a new integrated market monitoring council with participation from economic, financial, and monetary authority heads along with the Minister of Land, Infrastructure and Transport. The strategy focuses on strengthening responses to 'three-high' risks of inflation, exchange rates, and interest rates.
How much is South Korea's planned budget for next year?
According to Park Hong-geun, Minister of Strategy and Budget, next year's total expenditure will be organized at a record-high level of 800 trillion won range, representing an increase of more than 10% from this year. The 2027 national tax revenue is expected to exceed 500 trillion won, the largest tax revenue in history, far surpassing the initial forecast of 412 trillion won.
What measures is the government taking to support SMEs?
The Industrial Bank of Korea will expand on-lending support from 9.2 trillion won to 9.6 trillion won, an increase of 400 billion won. The government will also review expanding financial support for regional SMEs through reform of the Bank of Korea's financial intermediary support loans. The Korea SMEs and Startups Agency will make efforts to minimize policy fund interest rate increases in the second half.
