Emergency Ministerial Meeting on Economic Affairs

Government Works to Boost the Economy by Backing SMEs and the Real Estate Market

Deputy Prime Minister Kyungho CHOO presided over the Emergency Ministerial Meeting on Economic Affairs[1] on January 26 to discuss three agenda items: Korea’s 2022 GDP data and future policy directions, measures to support SMEs’ exports and refine the current real estate tax system.

The following is a summary of DPM CHOO’s remarks.

Korea’s 2022 GDP data and future policy directions

The challenges the global real economy faces are intensifying due to several factors such as major economies drastically increasing interest rates. Amid the global economic situation, Korea’s GDP growth shrank 0.4 percent in the fourth quarter of 2022 compared to the previous quarter.

Nevertheless, Korea fared better than other economies with high dependency on trade. Korea’s annual growth posted 2.6 percent, hovering above its potential growth last year.

For the first quarter of 2023, the Korean economy is projected to turn to positive growth thanks to base effects and China’ re-opening. Despite upcoming challenges driven by global economic contraction in the first half of 2023, the economy is expected to see a gradual recovery during the second half on the back of the improving global economy and rebounding semiconductor industry.

In an effort to boost the economy in the first half, the government has pledged to frontload 340 trillion won worth of spending to expedite fiscal execution and public and private investment project implementation.

The government will focus its policy resources on reactivating export and investment through regulatory reforms and tax and financial incentives while stepping up efforts to explore and support large-scale investment projects in the flagship industries and address issues of project delays. Moreover, it will spare no effort to take follow-up measures to ensure that the outcomes[2] made during the recent Korea-UAE summit will lead to tangible increases in bilateral export and investment.

Measures to support SMEs’ exports

The government will strengthen policy efforts to rapidly revive SMEs’ export and improve their global competitiveness.

To this end, the government will provide financial supports (a maximum of 10.9 billion won per company) in the forms of the export voucher program, R&D and policy financing to 1,000 “Small Giant” enterprises designated by the government. It will also deliver packaged support services[3] to boost export of promising products through online sales. Furthermore, shared office facilities will be operated overseas to help Korea companies seek networking and cooperation with one another, and a working group tasked with consultation will be set up and operated for the acquisition of international standard certifications.

Measures to refine the real estate tax system

There are concerns that the burden of comprehensive real estate holding taxes will be passed on to lessees as the government proposal failed to be fully accepted at the regular session of the National Assembly last year, resulting in some multi-home owners still facing heavy taxes.

In response, the government will work to amend the Comprehensive Real Estate Holding Tax Act at the provisional session of the National Assembly in February with a view to reducing tax burdens. As an attempt to achieve it, corporations with public interests, such as public housing providers, who own more than three homes for renting out will be taxed with the basic progressive tax rates (0.5 to 2.7 percent) instead of the heavy progressive tax rates (0.5 to 5.0 percent) under the amended act.

In addition, single-home owners who temporarily have ownership or purchasing rights of an additional home will now be subject to exemption from capital gains taxes if they offload a currently-owned home within three years, which is one more year from the current period of two years. The government will also press ahead with the amendment of the Enforcement Decree of the Income Tax Act within February in order to make sure that the benefit will be applied retroactively from January 12 in line with the pre-announced tax breaks for temporary two homeowners.