Park Hong-geun: Excess Tax Revenue to Support Vulnerable Borrowers

Park Hong-geun, the Minister of the Planning and Budget Office, announced on November 11 that the government will utilize excess tax revenue to bolster support for vulnerable borrowers. He emphasized the need for proactive fiscal measures to prevent the impact of high inflation and interest rates from affecting low-income households, especially in light of the cost of living becoming a key issue in the recent U.S. midterm elections.

During a luncheon meeting with experts at the National Assembly, Park discussed the potential effects of the U.S. midterm elections on the South Korean economy and the direction of fiscal responses.

"If citizens do not feel the benefits of economic growth, the momentum for growth may weaken," Park stated, announcing plans to advance three major livelihood projects focused on employment, housing, and financial support for the underprivileged. Participants agreed that strong export performance should translate into improvements in domestic demand and employment.

Park assessed that the South Korean economy's fundamentals remain solid, with growth projected in the mid-3% range for the year. However, he noted that the potential for policy changes following the U.S. midterm elections and increased volatility in financial markets necessitate a review of the recent stock market adjustments, particularly concerning the semiconductor-heavy industrial structure.

The meeting also addressed the potential impact of proposed regulations on artificial intelligence (AI) data centers in the U.S. on the domestic semiconductor industry and tax revenue. Park highlighted the significant role of semiconductors in the economy and fiscal landscape, stating that fluctuations in tax revenue could be mitigated by a future response fund.

Participants recognized that the ongoing global competition for technological leadership makes it unlikely for AI investments to decline significantly, and that expanding long-term supply contracts would support the performance of domestic semiconductor firms. Park announced plans to diversify the industrial structure by investing in seven next-generation growth sectors, including small modular reactors (SMRs), nuclear fusion, and quantum technology.

He indicated that the proposals discussed would be reflected in next year's budget deliberations, the management of the future response fund, and the establishment of medium- to long-term strategies.