Gov’t proposes $9.9 billion in spending
It was the fourth and largest supplementary budget proposed by the Moon Jae-in administration since coming to power in 2017.
The government said that if you include earlier stimulus measures such as cuts in individual consumption taxes, total spending to counter the coronavirus will be 31.6 trillion won.
Some 8.5 trillion won of the supplementary budget will be used to upgrade infrastructure protecting the public from contagious diseases, as well as financially supporting small- and medium-sized enterprises (SMEs) and small businesses. Some 3.2 trillion won will be used to cover the tax shortfalls tied to the crisis.
From the 8.5 trillion won, the government will spend 2.3 trillion won on upgrading the infrastructure to counter contagious diseases including 30 billion won to build 120 negative pressure isolation rooms and 146 special ambulances for contagious patients.
Korea only has 161 negative pressure isolation rooms in 16 cities and provinces throughout the country.
From the 2.3 trillion won the government also plans to build two more hospitals specializing in contagious disease treatment as well as a virus research center.
Also, the government will spend 350 billion won to assist medical institutions that suffered losses after they were temporarily shut down following visits from coronavirus patients. Some 400 billion won in loans will be offered.
The government plans to spend 2.4 trillion won supporting SMEs and small stores affected by the virus including offering emergency loans, loan guarantees and insurance.
It will pay subsidies to small stores to help with rising labor costs as well as to landlords who lower rents of small shop owners.
The government will issue more gift certificates, which are used to boost traffic at traditional markets.
A 3 trillion won budget will be allocated to help people in need, including low-income families. Some will be spent on vouchers to cover 30 percent of the wages in public job programs for senior citizens.
The government will also offer 10 percent tax refunds to people who purchase consumer appliances with high energy efficiency.
An 800 billion won budget has been earmarked to boost the economies of areas most affected by the outbreak, including subsidizing regional industries.
Daegu and North Gyeongsang are the most affected regions with more than half of the confirmed cases.
“I am certain that this supplementary budget will minimize the damage due to the spread of the unparalleled contagious virus and uphold the economy,” Finance Minister Hong Nam-ki said during a cabinet meeting on Wednesday.
The finance minister said the government has tried to include as many measures as it could to encourage consumer spending, which has dropped as the crisis grew.
“We have prepared the measures from the perspective that there is nothing more important than immediately supporting efforts to overcome the damage and revive economic momentum,” Hong said. “Unless we prevent the virus from spreading, there will be no economy to save.”
Until early last month, the government was reluctant to resort to a supplementary budget.
After the initial outbreak became a crisis, President Moon on Feb. 21 ordered government officials to come up with aggressive measures that were “unprecedented.”
The budget is expected to be submitted to the National Assembly later today, and it is most likely to pass. The opposition has agreed on the urgent need for it.
Although the government has yet to revise its economic growth target for this year, which is 2.4 percent, the central bank last week shaved its growth projection from 2.3 percent to 2 percent.
The Organisation for Economic Cooperation and Development lowered its projection also from 2.3 percent to 2 percent.
Some private institutions think it will be below 2 percent for the first time since 2009.
The Moon administration has presided over ever-smaller growth rates for the economy.
After reporting 3.2 percent growth in 2017, up from 2.9 percent the previous year under the Park Geun-hye administration, the economy retreated to 2.7 percent in 2018 and 2 percent last year, the slowest growth since 2009 in the wake of the global financial meltdown.
The Moon government has resorted to supplementary budgets every year.
Its first year’s 11.2 trillion won extra budget was supposed to create jobs.
In 2018, the government passed a 3.8 trillion won supplementary budget to create jobs for young people and support regions that were heavily reliant on declining industries like shipbuilding and automobiles.
Last year, a 5.8 trillion won extra budget was drawn up to counter a sluggish economy and fine dust pollution.
The current supplementary budget is expected to increase the national debt as most of it will be funded through government bonds.
Last year was the first in which it issued government bonds for the supplementary budget. The government bonds that covered last year’s 5.8 trillion won supplementary budget amounted to 3.6 trillion won.
This year, the government plans to issue 10.3 trillion won in treasuries, which account for 88 percent of the additional funding. The rest will be covered by extra revenue from the central bank’s surplus and government funds invested in stocks and bonds.
The country’s debt will go up from last year’s 805.2 trillion won to 815.5 trillion won, a 1.3 percent increase.
As a result, the national debt is likely to exceed 40 percent of GDP for the first time. Previously, the national debt was estimated at 39.8 percent of GDP.
Finance Minister Hong said more debt is inevitable and the government will “closely” manage it.
BY LEE HO-JEONG [firstname.lastname@example.org]