Government will put over half of H1 budget towards taming inflation, reviving construction sector

The government plans to allocate over 65 percent of its fiscal spending in the first half of 2024 towards addressing high inflation and interest rates.

Finance Minister Choi Sang-mok, center, speaks during a ministerial meeting held at the government complex in central Seoul Tuesday. [YONHAP]

The government will put more than 65 percent of its annual fiscal spending in the first half of 2024 toward taming the prices of agricultural products and reviving the construction sector through spending in social overhead capital.

“Our economy is generally showing signs of turnaround centered on exports, but it likely seems difficult for people to feel the recovery in the first half of the year due to the pressure caused by the accumulated high inflation and interest rates,” said Finance Minister Choi Sang-mok in a ministerial meeting Tuesday.

The government plans to spend 350.4 trillion won ($263 billion) out of its budget of around 560 trillion-won through June on projects related to social welfare, job creation and social overhead capital (SOC) . The government plans to spend 8 trillion won on roads, 8.1 trillion won on railroads and 900 billion won on airports and ports.

Choi also announced a set of measures to boost public welfare and tame prices ahead of the Lunar New Year holiday.

It will inject 84 billion won, double last year’s amount, into supplying a record 260,000 tons of the goods, according to the Tuesday announcement.

That includes products that are high in demand during the holidays, including apples and pears, whose prices have soared 20 percent since last year due to poor crop conditions.

The move is an extension of the government’s efforts to tame the prices of produce items that have seen recent rapid increases, including green onions, eggs and flower.

The government has been offering subsidies and lowering tariffs starting in mid-January.

The ministry announced that it will extend the grace period after which it will apply hiked electricity fees to 3.65 million underserved households. That rate was upped twice in 2023.

And it will offer lower interest rates to small business owners and some 200,000 accommodation coupons to tourists in February in an effort to boost domestic travel.

Choi further vowed to dispatch four new vessels to European trade routes starting this week in a bid to prevent supply chain disruptions. The four carriers will have a combined capacity of up to 29,000 twenty-foot equivalent units.

That move is a response to the attacks on Red Sea ships, triggered by the geopolitical tension in the Middle East, that have pushed up freight costs. Carriers have rerouted away from the crucial Middle East route following attacks by Iranian-backed Houthi militants on merchant ships, which has crimped global trades.

“Shipments of Korea’s exports and imports of energy, like petroleum and natural gas, are operating normally, but freight rates are continuously on the rise, and temporary lack of container storage spots is expected,” Choi added.

The Cabinet, late last year, approved the government’s plan to front-load up to 75 percent of fiscal spending for 2024 in the first half of the year.

BY JIN MIN-JI [jin.minji@joongang.co.kr]