South Korea pledges $7.1B stimulus package to counter supply shocks from Iran war

South Korea has pledged a 10.5 trillion won ($7.1 billion) stimulus package and additional emergency measures as it moves to cushion the economic fallout from escalating global tensions linked to the US-Israeli war on Iran, the country’s finance chief said Thursday.

Finance Minister Koo Yun-cheol said the government would proactively respond to mounting risks to livelihoods and supply chains, warning that the conflict in the Middle East has emerged as “the biggest risk factor for the global economy," Yonhap News Agency reported.

Speaking on the sidelines of the G20 Finance Ministers and Central Bank Governors meeting in Washington, DC, Koo also chaired an emergency economic meeting via video link to assess the country’s response to the crisis.

“Now, the ability to cope with this war is a nation's competitiveness,” he said.

As part of preemptive steps, Koo announced plans to release public stockpiles of automotive urea and urea solution by the end of the month to address potential shortages.

The government will also maintain its emergency economic response system until the trajectory of the conflict becomes clearer, while stepping up efforts to stabilize supply chains and mitigate the impact on businesses and households.

Koo urged ministries to accelerate the execution of the supplementary budget, including relief funds aimed at offsetting damage caused by high oil prices. Payments are set to begin on April 27, with authorities targeting the disbursement of more than 85% of the allocated funds within the first half of the year.

He also said that Seoul is stepping up international coordination efforts, including measures to ensure the safe passage of South Korean vessels through the Strait of Hormuz and to secure supplies of key energy commodities such as crude oil and naphtha.

The remarks come as the International Monetary Fund recently lowered its global growth forecast to 3.1% from 3.3%, citing inflationary pressures, supply chain disruptions and heightened financial uncertainty.