South Korea's government is taking measures to mitigate the impact of the Middle East conflict on the Korean economy, calling for additional budget and policy responses.

To mitigate the potential impact of Middle East conflicts on our economy, the Korean government and major research institutions have proposed the urgent need to quickly prepare additional supplementary budgets and utilize various policy measures. This proposal was discussed at an emergency joint government and private sector meeting on the Middle East situation, chaired by Deputy Prime Minister and Minister of Economy and Finance Choo Kyung-ho on the 12th.

Although South Korea’s economy benefits from a booming semiconductor export sector and is expected to achieve about 2% growth, weak domestic demand and high inflation remain challenges for vulnerable groups in employment and economic perception. Participants emphasized that, considering the possible economic shocks from the Middle East war, swift policy responses are crucial.

In particular, rising oil prices could worsen cost structures and dampen consumer confidence, potentially exacerbating economic difficulties for small business owners, freight transporters, farmers, and fishers. Such conditions could extinguish the spark of domestic demand recovery, which the government is taking seriously.

Observations from the government and research institutions suggest that if additional budgets are financed through excess tax revenues generated by a booming semiconductor sector, the negative impacts on macroeconomic factors such as interest rates, exchange rates, and prices would be relatively limited. They also emphasized the need to minimize errors and implement targeted support for vulnerable sectors.

These measures are expected to play an important role in responding to future global economic fluctuations and enhancing economic stability. By doing so, they will strengthen the medium- and long-term foundation of the economy and improve resilience against external shocks.