Market Update: Gov’t to payout to low- and mid-income households, aims to stabilize oil prices – Full Analysis

President Lee Jae Myung presides over a Cabinet meeting at the Blue House in central Seoul on March 31. [YONHAP]

 
The government will give up to 600,000 won ($400) per person to lower- and middle-income households as part of a supplementary budget to offset surging oil prices.
 
The government approved the 2026 supplementary budget plan at a Cabinet meeting on Tuesday, totaling 26.2 trillion won.
 
The budget is divided into 10.1 trillion won for easing oil price burdens, 2.8 trillion won for stabilizing livelihoods, 2.6 trillion won to minimize industrial damage and stabilize supply chains, 9.7 trillion won to support local finances and 1 trillion won for government bond repayment.
 
The move comes as oil prices surge and supply instability deepens amid the Iran war, with the government seeking to contain the impact before it spreads further across the economy.
 
At the core of the plan are support measures for middle- to lower-income households and efforts to stabilize fuel prices.
 

A notice for local currency vouchers is posted at a traditional market in Suwon, Gyeonggi, on March 31. [NEWS1]

 
A key component is the oil price relief payment program, which allocates 4.8 trillion won to provide tiered support based on income levels and regions. Households in the bottom 70 percent of income brackets will receive between 100,000 won and 600,000 won per person, depending on health insurance premium levels.
 
In the Seoul metropolitan area, eligible households will receive 100,000 won per person. Near-poverty and single-parent households will receive 450,000 won, while recipients of basic livelihood security benefits will receive 550,000 won.
 
In areas outside the greater Seoul region, eligible households will receive 150,000 won per person, with those in depopulation risk regions receiving between 200,000 won and 250,000 won. Near-poverty and single-parent households will receive 500,000 won, while basic livelihood recipients will receive 600,000 won per person.
 
The payments are expected to be distributed in forms like previous Covid-19 relief funds, such as local currency vouchers, prepaid cards or credit and debit cards. Spending will be limited to affiliated local merchants to boost regional economies.
 
The government plans to launch a task force once the budget passes the National Assembly. Vulnerable groups will receive payments first, followed by general households after eligibility is confirmed through health insurance data. Payments for vulnerable groups could begin as early as late April.
 

A gas station in Seocho District, southern Seoul, on March 31 [YONHAP]

 
An additional 50,000 won will be provided to 200,000 low-income households using kerosene or liquefied petroleum gas. Temporary fuel-linked subsidies will also be offered to greenhouse farmers and fishers affected by rising oil prices.
 
The plan also includes measures to ease transportation and fuel costs, with 5.1 trillion won allocated. Of this, 4.2 trillion won is set aside as contingency funds to compensate refiners under a fuel price cap system, which limits supply prices while the government offsets losses.
 
The current budget reflects six months of projected losses under the system.
 
“If additional support is needed, it will be reflected in next year’s budget,” said Cho Yong-beom, head of budgeting at the Ministry of Planning and Budget.
 
The refund rate under the K-Pass program, a government scheme that reimburses part of public transportation costs, will be temporarily raised from 20 percent to 30 percent for six months.
 
A total of 2.8 trillion won will be used to support livelihoods, including emergency management funds for small business owners and expanded employment retention subsidies for vulnerable workers, including those in the petrochemical industry.
 

President Lee Jae Myung speaks during a Cabinet meeting at the Blue House in central Seoul on March 31. [YONHAP]

 
The budget also includes 900 billion won for youth employment programs, expanding vocational training card recipients from 50,000 to 60,000 and creating 23,000 public service jobs.
 
The government expects the supplementary budget to boost GDP growth by about 0.2 percentage points. The funding will come from increased tax revenue rather than additional bond issuance.
 
Tax revenues include 14.8 trillion won from corporate taxes, 10.3 trillion won from securities transactions and rural development taxes, and 4.8 trillion won from earned income taxes.
 
“The increase reflects improved corporate performance driven by the semiconductor sector and positive tax revenue effects from active stock market trading,” said Kim Byung-cheol, a senior tax policy official at the Ministry of Finance and Economy.
 
With the supplementary budget, total government spending for 2026 will rise from 727.9 trillion won to 753.1 trillion won, with the growth rate increasing from 8.1 percent to 11.8 percent. The government said the spending increase does not amount to excessive fiscal expansion, as it is being funded by higher-than-expected tax revenues in response to the crisis.
 
Despite the expanded spending, the managed fiscal deficit is expected to slightly improve from 107.8 trillion won to 107.6 trillion won, while the national debt-to-GDP ratio is projected to fall from 51.6 percent to 50.6 percent.
 
However, the improved fiscal indicators are largely due to an upward revision in nominal growth projections, from 3.9 percent to 4.9 percent, rather than structural improvements.
 
A government official said the figures reflect unchanged official projections, despite growing risks such as the Iran war. The Organisation for Economic Cooperation and Development on Friday revised down Korea’s growth outlook for this year by 0.4 percentage points to 1.7 percent.

This article was originally written in Korean and translated by a bilingual reporter with the help of generative AI tools. It was then edited by a native English-speaking editor. All AI-assisted translations are reviewed and refined by our newsroom.
BY JANG WON-SEOK [shin.minhee@joongang.co.kr]