Economic contraction forces South Korea to take action? Citigroup predicts $68 billion USD new stimulus plan may be launched in March.

In a report released by Citigroup on Thursday, it was pointed out that in order to address the issue of uneven economic growth, South Korea may launch a new round of fiscal stimulus plan with a scale of about 100 trillion Korean won (equivalent to 68 billion US dollars) as early as March, with the culture and arts sectors expected to receive policy support. This forecast is based on the latest data: due to a general shrinking demand, the South Korean economy unexpectedly contracted in the fourth quarter of 2025, highlighting the serious challenges faced by policy makers - growth stimulus measures are constrained by the weakening of the Korean won and rising financial stability risks. Citigroup stated in the report: "In terms of fiscal policy, the South Korean government may use excess tax revenue to arrange additional budget expenditures and will not issue additional bonds." Recently, official statements from South Korea regarding the new round of fiscal support have sent conflicting signals. Earlier this week, reports quoted Kim Young-fan, head of the presidential policy office, as saying that South Korea is currently not considering preparing additional budgets. However, just last Tuesday, South Korean President Lee Jae-myung expressed the possibility of introducing additional expenditure policies in the future and requested the Minister of Culture to review the budget needs in the culture sector. As speculation heats up about South Korea's fiscal stimulus policy, the stance of the Bank of Korea's monetary policy has actually shifted to a neutral position. The central bank announced last week that it would keep the benchmark interest rate at 2.5% unchanged for the fifth consecutive meeting, and in its statement, it removed any mention of possible interest rate cuts, signaling the central bank's focus on financial stability. Citigroup estimates that the scale of the new stimulus plan introduced by South Korea accounts for about 0.4% of the country's Gross Domestic Product (GDP), and over the next four quarters, this plan is expected to boost South Korea's economic growth by about 0.07 to 0.15 percentage points.