Consumption coupons waste fiscal resources: Only investment can revive growth

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Consumption coupons waste fiscal resources: Only investment can revive growth

Published: 02 Oct. 2025, 00:00

Audio report: written by reporters, read by AI

Mangwon Market, a traditional market in Mapo District, western Seoul, bustles with visitors on Aug. 24. [YONHAP]

The government’s 13 trillion won ($9 billion) consumption coupon program, touted as a “prime mover for domestic recovery,” has proven fleeting in its effect. According to Statistics Korea, retail sales rose 2.7 percent in July from the previous month but fell 2.4 percent in August, the sharpest decline since February 2023.

From July 21, about 50.08 million people — 99 percent of the population — received 150,000 won each, injecting over 9 trillion won into the economy. The Ministry of Economy and Finance hailed July’s uptick as “a positive signal for recovery,” and President Lee Jae Myung said at an event marking 100 days in office that “consumption sentiment has revived thanks to the coupons.” Yet the data show this was only a temporary illusion. Experts who warned that the program would merely pull forward spending have been proven right.

The real problem is that debt has piled up without boosting growth. The International Monetary Fund has repeatedly cautioned that Korea, as a nonreserve currency country, must adopt fiscal rules and prepare structural reforms for rapid aging. Despite this, the government is sticking with expansionary spending. Growth is projected at below 1 percent this year and only in the low 1 percent range next year, but government spending in 2025 is set to rise 8.1 percent. Over the medium term, annual increases of 5.5 percent are planned. Next year, debt service costs will reach 150.7 trillion won, consuming 22.4 percent of total revenue.

The earlier Moon Jae-in administration already expanded the national debt by more than 400 trillion won under its income-led growth agenda. Today’s “coupon-led growth” seems little different in name or outcome. The Bank of Korea projects private consumption to grow barely above 1 percent this year. Cash handouts will not reverse the trend. Even so, a second round of 100,000 won coupons is being distributed to all but the top 10 percent of households. The public may again express gratitude, saying they bought beef or medicine, but such momentary satisfaction does not revive the economy. This is a classic case of populist cash distribution.

The real solution lies in investment and reform. Fiscal resources must be directed toward innovative industries through tax benefits and research support, expanding both the growth base and employment. Cash aid should be limited to a minimum social safety net. Anti-business regulations must also be eased. In Silicon Valley and Beijing’s tech hub of Zhongguancun, companies work virtually without time restrictions, driving technology competition and creating jobs and income. In Korea, the 52-hour workweek and the "Yellow Envelope Bill" dampen investment incentives. Removing such barriers alone could spark a virtuous cycle of investment and domestic demand.

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.