President Yoon Suk Yeol prays during a national prayer breakfast in Seoul, Friday. Yonhap

The prolonged slowdown of the Korean economy is evident, as highlighted by the inconsistent stance of the presidential office, the government and the ruling conservative People Power Party (PPP) on drafting a supplementary budget, according to observers, Sunday.

The presidential office first floated the idea of “expanding the role of fiscal discretion to reduce polarization” on Friday, seeking a breakthrough in escalating public scrutiny over misconduct and scandals surrounding the first lady Kim Keon Hee and close aides to President Yoon Suk Yeol.

However, the PPP immediately distanced itself from the suggestion, mindful of the potential politicization of what will be characterized as an overall failure of the Yoon administration. Calls for an additional budget would give the impression of admitting defeat after years of policy efforts, inviting legitimate criticism seeking political gains.

The finance ministry remains concerned over debt financing and the consequent deterioration in the country's fiscal soundness, an inevitable course of action accompanied by a further volume increase in the already record-high 221 trillion won ($157 billion) in Korea Treasury Bond (KTB) issuance next year.

Greater KTB volume will push up the yields on corporate bonds, increasing borrowing costs for firms. The vicious cycle will negate the effects of an extra budget, experts say, despite the potential inflow of up to 20 trillion won in offshore investment funds tied to the FTSE Russell World Government Bond Index.

“Tax shortfall this year brought this issue to the fore,” an observer said.

The need to reinvigorate the economy is warranted due to an economic slowdown in the years of postpandemic monetary tightening, compounded further by the austerity drive of the Yoon administration, the official said. Also at play is the stalled monetary easing by the Bank of Korea, stymied by the rapid buildup of household debt and surge in house prices in Seoul and surrounding areas.

“The overall economy has stagnated without meaningful improvements in the weakened domestic spending," he said. "Further clouding the country are the low growth prospects of the country's exports under the incoming Trump administration in the United States.”

Notwithstanding these bleak developments, the ruling party is unlikely to give way for the budget discussion to advance, preoccupied by an Assembly power struggle amid next year's budget allocation.

“No request has been made by the government, and we are not considering it,” Rep. Kim Sang-hoon, the PPP's chief policymaker, said.

“A supplementary budget early next year is not under consideration for either the party or the government.”

Kim cited a law whereby the conditions for granting an extra budget are limited to the potential or actual occurrences of war, large disasters, economic recessions, unemployment or changes in inter-Korean relations.

However, underlying the PPP's concern is the fear of losing control of the ongoing 2025 budget proposal.

The main opposition Democratic Party of Korea is calling for expanded spending to improve the public's livelihood.

The presidential office openly suggesting the extra budget could, in that sense, weaken the PPP argument against the budget increase, ending up boosting the main opposition's claim that next year's budget is insufficient to revive the sluggish economy.

“Concerns are growing that next year's growth will be limited to below 2 percent, the country's potential growth,” the official said. “Whether the issue will overcome the political obstacles remains to be seen."