Ministry of Economy and Finance

                                                                Acting Deputy Prime Minister Lee Hyoung Il convened a Meeting on Macroeconomic and Financial Stability[1] with related institutions on June 19 at the Korea Federation of Banks building. The meeting reviewed recent developments in global financial markets and the impact on Korea’s financial and foreign exchange (FX) markets following the U.S. Federal Open Market Committee’s (FOMC) decision early this morning (KST) to hold interest rates steady, and discussed future plans.     The following are the remarks by Acting Deputy Prime Minister Lee.     [Outcomes of the June FOMC Meeting: Market Reactions and Assessment]   At the FOMC meeting overnight, the U.S. Federal Reserve (Fed) decided to leave the policy rate unchanged for the fourth consecutive time, keeping the upper bound at 4.5%. It also maintained its projection for a 50 basis point rate cut within this year.   In contrast, alongside the Fed’s economic projections pointing to a sharper rise in inflation, the outlook for interest rate cuts beyond next year has been scaled back.   At the press conference, Chair Powell noted that the impact of tariff policy remains highly uncertain, emphasizing the need for caution in adjusting monetary policy until the effects of such measures become clearer.   In the early hours of today, global financial markets broadly viewed the outcome of the meeting as being in line with expectations, with U.S. Treasury yields fluctuating within a narrow range.     [Future Policy Directions]   The airstrike by Israel on Iran has heightened volatility in commodity prices and global financial markets.   The domestic financial markets continue to show relative stability. Equity prices have been on an upward trend since the end of May, and financing conditions, including corporate bond issuance, have remained sound.   However, the USD/KRW exchange rate has exhibited increased volatility amid growing caution in the market.   The government stays vigilant and closely monitors related developments, maintaining a 24-hour monitoring system[2], while ensuring timely responses through close coordination among agencies based on contingency plans as necessary.   [1]  Senior Deputy Governor of the Bank of Korea (BOK), Standing Commissioner of the Financial Services Commission (FSC), First Senior Deputy Governor of the Financial Supervisory Service (FSS). [2] A joint emergency response team comprising relevant agencies is currently operating to address the Middle East situation. Please refer to the attached files.   

Ⅰ. Background   The Korean economy has exhibited near-zero growth for four consecutive quarters, reflecting a deepening economic slowdown. Amid continued weakness in construction investment, subdued private consumption – partly due to deteriorated sentiment earlier this year – has further constrained growth.   In addition, the burden on low-income and vulnerable groups is intensifying, as the recovery of domestic demand remains sluggish. The rising delinquency and closure rates among self-employed individuals – largely due to debt accumulated during the COVID-19 pandemic – further highlight the challenges facing the domestic economy.   In this context, national tax revenues are projected to fall short in light of the weaker growth and declining corporate performance.     Ⅱ. Policy directions for the Supplementary Budget Proposal   The government will strategically allocate resources to reinvigorate the economy and stabilize people’s livelihoods, thereby fostering a virtuous cycle of growth.   -           Stimulate economic activity through measures to promote consumption and investment, alongside the expansion of construction-related expenditures. -           Support the swift recovery of small business owners by alleviating debt burdens, while enhancing employment safety nets and providing targeted assistance to vulnerable groups to promote            livelihood restoration. -           Utilize adjustments to revenue projections to ensure the timely and effective execution of the annual budget without disruption.   In order to uphold fiscal sustainability, the government will mobilize resources through expenditure restructuring and the strategic utilization of available fund reserves, thereby minimizing reliance on additional sovereign bond issuance.   Ⅲ. Overview of the Supplementary Budget Proposal   The Supplementary Budget Proposal amounts to 30.5 trillion won, comprising 20.2 trillion won in additional expenditures (15.2 trillion won for ①economic stimulus, 5.0 trillion won for ②livelihood stability) and 10.3 trillion won in ③revenue adjustments. The total amount of additional government bond issuance is 19.8 trillion won.   (Total expenditure) An increase of 6.9% compared to the previous year. (687.1 → 702.0 trillion won).   (Managed Fiscal Balance) A decrease of 24.0 trillion won in comparison to the first supplementary budget (-86.4 → -110.4 trillion won), corresponding to a 0.9%p decline relative to GDP (-3.3 → -4.2%).   (Government Debt) An increase of 19.8 trillion won compared to the first supplementary budget (1,280.8 → 1,300.6 trillion won), representing a rise of 0.6%p relative to GDP (48.4% → 49.0%).      (trillion won)   2024 Budget (A) 2025 Budget            Changes             (B-A)                  Original        1st Supplementary (A)         2nd Supplementary (B) Total Government Revenue 612.2 651.6 652.8 642.4 -10.4 Total Government Expenditure 656.6 673.3 687.1 702.0 +14.9 Consolidated Fiscal Balance (% to GDP) -44.4 (-1.8) -21.7 (-0.8) -34.3 (-1.3) -59.6 (-2.2) -25.3 (-1.0%p) Managed Fiscal Balance (% to GDP) -91.6 (-3.6) -73.9 (-2.8) -86.4 (-3.3) -110.4 (-4.2)               -24.0 (-0.9%p) Government Debt (% to GDP)  1,195.8 (47.4) 1,273.3 (48.1) 1,280.8 (48.4) 1,300.6 (49.0) +19.8 (+0.6%p)     Ⅳ. Two pillars of the Supplementary Budget Proposal   1. Consumption and investment promotion for economic revitalization (15.2 trillion won)   ⅰ  (Consumption) Distribute livelihood recovery coupons (150,000 - 500,000 won per person) to all citizens, while providing additional consumption incentives such as expanding the issuance of local                           gift certificates. ⅱ (Construction) Revitalize the construction industry through the early execution of social overhead capital (SOC) projects and the purchase of unsold housing units. ⅲ  (Investment) Promote investment in emerging industries through expanded contributions to the Korea Fund of Funds and facilitating the AI Transformation (AX).   1) Enhance household spending capacity (11.3 trillion won). -           Distribute livelihood recovery coupons (10.3 trillion won). -           Provide consumption incentives (1.0 trillion won). 2) Revitalize the construction sector (2.7 trillion won). 3) Promote investment in emerging industries (1.2 trillion won). -           Support venture and small and medium-sized enterprises (SMEs) (0.9 trillion won). -           Bolster investment in AI and renewable energy industries (0.3 trillion won)   2. Livelihood Stability (5.0 trillion won)   ⅰ  (Small business owners) Provide support to facilitate the recovery of struggling small business owners through a comprehensive debt restructuring package, including the write-off of long-term                                                delinquent debt held by vulnerable borrowers and expanded principal reduction measures. ⅱ  (Employment Stability) Increase unemployment benefit coverage and reinforce reemployment assistance in high-priority sectors, including the construction industry. ⅲ  (Others) Stabilize prices of essential food commodities and shore up assistance for vulnerable populations, particularly in housing and healthcare services.   1) Support the recovery of struggling small business owners (1.4 trillion won). 2) Strengthen the employment safety net (1.6 trillion won). 3) Maintain price stability and bolster assistance for vulnerable groups (2.0 trillion won). -           Maintain price stability (48.4 billion won). -           Enhance assistance for vulnerable groups (0.6 trillion won). -           Reinforce local government finances (1.0 trillion won). Please refer to the attached files. 

In April 2025, industrial production, services production, retail sales, and facilities and construction investments all declined.   Overall industrial production fell (-0.8% m-o-m, +0.4% y-o-y) as production dropped in the industrial (-0.9% m-o-m, +4.9% y-o-y), construction (-0.7% m-o-m, -20.5% y-o-y), and services sectors (-0.1% m-o-m, +0.7% y-o-y).   Retail sales (-0.9% m-o-m, -0.1% y-o-y), facilities investment (-0.4% m-o-m, +8.4% y-o-y) and construction investment (-0.7% m-o-m, -20.5% y-o-y) all went down.   Exports in May 2025 decreased by 1.3% year-on-year. However, average daily exports increased by 1.0% in May compared to the same month of last year.   The consumer sentiment index (CSI) in May rose by 8.0 points month-on-month to 101.8. The composite business sentiment index (CBSI) increased by 2.8 points to 90.7, the CBSI outlook for June also rose by 3.2 points to 89.5.   Both the cyclical indicator of the coincident composite index and the cyclical indicator of the leading composite index for April went up by 0.2 points and 0.3 points respectively.   In May, the increase in the number of employed persons widened and consumer prices rose at a slower pace.   The number of employed persons grew by 245,000 compared to the same month last year, and the unemployment rate fell by 0.2%p from a year ago.   The year-on-year consumer price index (CPI) climbed by 1.9%, driven by a larger decline in agricultural and petroleum product prices and a smaller increase in prices for personal services. The CPI excluding food and energy moved up by 2.0% year-on-year.   In May, stock prices went up, Korean Treasury Bond yields rose and the Korean won strengthened.   In April, housing prices dropped (-0.02%, m-o-m) while Jeonse[1] prices remained stable (+0.00%, m-o-m).   Recently, the Korean economy has continued to face downward pressure, as the recovery of domestic demand – including consumption and construction investment – remains sluggish, while employment challenges persist particularly in vulnerable sectors. In addition, external conditions have worsened due to the imposition of tariffs by the United States, leading to a slowdown in exports.   The global economy is facing sustained volatility in global financial markets and concerns over slower trade and growth, primarily owing to the worsening trade conditions driven by tariff measures imposed by major economies.   The government will swiftly formulate and implement a supplementary budget aimed at supporting economic recovery, boosting consumption, and assisting vulnerable groups and small businesses. At the same time, all efforts will be made to respond to trade risks, including support measures for domestic companies affected by U.S. tariff measures. [1] lump-sum deposits with no monthly payments Key Statistics Employment   2024                                         2025 Annual Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Number of employed  (million) 28.58 28.40 28.69 28.91 28.91 28.86 28.80   28.84 28.85 28.82 28.04 27.88 28.18 28.59 28.89 29.16 Employment  rate  (%) 62.7 62.4 63.0 63.5 63.5 63.3 63.2    63.3 63.3 63.2 61.4 61.0 61.7 62.5 63.2 63.8 (Seasonally adjusted)  62.7 62.8 62.9 62.6 62.6 62.6 62.7    62.8 62.7 62.7 62.3 62.9 63.0 63.0 63.1 62.9 Consumer Price Index                                                                                          (%)   2024                                    2025 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar  Apr    May y-o-y  2.8 3.1 3.1 2.9 2.7 2.4 2.6 2.0 1.6 1.3 1.5 1.9 2.2 2.0 2.1 2.1 1.9 m-o-m 0.4 0.5 0.1 0.0 0.1 -0.2 0.3 0.4 0.1 0.0 -0.3 0.4 0.7 0.3 0.2 0.1 -0.1   Retail Sales (Percentage change from the previous period, %)   2023   2024                                               2025 Annual Q1 Q2 Q3 Q4 Annual Q1 Q2 Q3  Q4  Q1¹  Apr¹  Jan Feb  Mar¹ Retail sales -1.5 0.6 -0.5 -1.9 0.4 -2.1 -2.2 -0.3 0.7 -0.4 0.4 -0.6 1.8 -1.0 -0.9      (y-o-y) - -0.8 -0.7 -2.7 -1.9 - -1.6 -3.1 -1.5  -2.0 -0.3 0.2 -1.8 0.7 -0.1 1. Preliminary Facility Investment Index (Percentage change from the previous period, %)   2023                                    2024             2025 Annual Q1 Q2   Q3 Q4 Annual Q1 Q2 Q3 Q4      Q1¹     Apr¹     Feb     Mar¹ Facility investment index -4.8 -9.0 1.5 -3.8 5.0 3.0 -1.5 -1.4 10.2 -1.8 -1.7 21.3 -0.6 -0.4 (y-o-y) - -1.5 -0.9 -10.5 -5.8 - -1.4 -3.3 11.5 5.3 5.6 8.0 14.5 8.4 1. Preliminary    Construction Completed  (Percentage change from the previous period, %)   2023                                    2024                                           2025   Annual Q1 Q2 Q3 Q4   Annual      Q1 Q2 Q3 Q4         Q1¹        Jan       Feb¹       Mar¹ Construction Completed (Constant) 7.8 3.4 -0.4 1.9 -4.2 -4.7 7.7 -8.2 -3.8 -5.1 -6.1 -4.5 2.4 -2.7 (y-o-y) - 12.0 9.5 10.8 0.8 - 4.0 -3.1 -9.1 -9.7 -20.7 -27.4 -20.2 -14.7 1. Preliminary Exports and Imports  (US$ billion, y-o-y, %)   2023 2024 2025 Annual       Q4 Annual         Q1         Q2          Q3 Q4         Q1          Mar                  Apr      May        Mar Exports 632.23 168.12 683.61 163.30 56.52 171.51 173.65 175.15 159.85 58.12 58.21 57.27 (y-o-y, %) -7.5 5.7 8.1 8.0 3.0 10.1 10.5 4.2 -2.1 2.8 3.7 -1.3 Average daily exports 2.34 2.49 2.53 2.44 2.51 2.58 2.53 2.56 2.50 2.65 2.43 2.66 Imports 642.59 158.56 631.77 154.81 52.42 157.04 160.00 159.92 152.57 53.28 53.30 50.33 (y-o-y, %) -12.1 -10.7 -1.6 -11.1 -12.6 -1.4 6.2 0.9 -1.4 2.2 -2.7 -5.3 Average daily imports 2.38 2.35 2.34 2.31 2.33 2.36 2.34 2.33 2.38 2.42 2.22 2.34 Industrial Production (Mining, Manufacturing, Electricity and Gas Production)                 (Percentage change from the previous period, %) 2022 2023  2024          2025 Annual Annual   Q1 Q2 Q3 Q4 Annual Q1 Q2 Q3 Q4 Q1¹ Apr¹ Total Production2 m-o-m, q-o-q - - 0.6 2.8 1.4 1.8 - -0.8 1.8 -0.5 1.5 0.2 -0.9 y-o-y 1.0 -2.6 -8.2 -6.0 -0.5 4.8 4.1 5.3 5.2 2.4 3.5 1.9 4.9 Manufacturing Production m-o-m, q-o-q - - 0.6 3.0 1.4 1.9 - -0.8 1.8 -0.8 2.1 0.1 -0.9 y-o-y 1.0 -2.6 -8.5 -6.1 -0.3 5.2 4.2 5.8 5.3 2.2 3.7 2.0 5.2 Shipments (m-o-m, q-o-q) - - 0.3 3.0 -1.3 2.0 - -2.8 1.8 -1.0 0.8 -1.8 0.9 Inventory3 (m-o-m, q-o-q) - - 1.2 0.6 1.5 -5.2 - -2.1 -0.5 0.1 -0.5 -4.6 0.0 Production capacity (y-o-y) 0.1 -0.5 -1.4 -1.5 -0.6 1.5 0.7 1.0 0.9 0.4 0.6 -0.6 0.0 Average operation ratio4 74.5 72.1 70.9 72.2 72.5 72.7 72.7 72.4 73.4 72.5 72.5 73.5 73.8   1. Preliminary   2. Mining, Manufacturing, Electricity and Gas Production   3. End-point (month, quarter, and year)   4. Average operation ratio for the month (or quarter)    Service Output            (Percentage change from the previous period, %)   2022 2023                                            2024                         2025 Annual Q1 Q2 Q3 Q4 Annual Q1 Q2 Q3 Q4  Annual¹  Q1 Q2 Q3 Q4 Q1¹  Apr¹ Jan  Feb  Mar¹ Service output 7.0 0.6 3.4 1.8 0.1 3.4 0.7 0.5 1.0 0.3 1.0  0.3 0.0     -0.3    0.7 0.3  -0.9 0.8  -0.1  -0.1     1. Preliminary Composite Indices of Coincident and Leading Indicators                                                                                            (Points)    2024                                2025 Jun Jul Aug Sep  Oct Nov Dec¹ Jan Feb Mar¹ Apr¹ Cyclical indicator of coincident composite index 99.6 99.1 99.0 99.0 99.3 98.9 98.8 98.4 98.5 98.7 98.9 m-o-m (points) -0.1 -0.5 -0.1 0.0 0.3 -0.4 -0.1 -0.4 0.1 0.2 0.2 Cyclical indicator of leading composite index 100.9 100.9 100.8 100.8 100.8 100.8 100.7 100.3 100.4 100.6 100.9 m-o-m (points) 0.1 0.0 -0.1 0.0 0.0 0.0 -0.1 -0.4 0.1 0.2 0.3 1. Preliminary   Please refer to the attached files.