Supplementary budget of W11.7 trillion is on trackLawmakers agreed to the amount of the government’s supplementary budget - 11.7 trillion won ($9.4 billion)- to help Korea counter the economic impact of the coronavirus outbreak.
But as of deadline, the vote had not been held to pass the extra budget.
Previously, the ruling Democratic Party asked for a slightly larger amount to be spent.
On Tuesday, lawmakers agreed to allocate 1 trillion won of the budget to support Daegu and North Gyeongsang, the regions hardest hit by the outbreak.
In addition, 3 trillion won of funding was allocated to programs directly connected to the Covid-19 outbreak, according to lawmakers on the Special Committee on Budget and Accounts.
Changes to the budget were approved by the National Assembly’s Strategy and Finance Committee on Tuesday.
They include increased support for the lower-income households and small businesses directly affected by the virus outbreak.
Initially the government proposed tax cuts to small businesses whose annual revenue was less than 66 million won. Lawmakers raised that bar to small businesses with annual revenue of less than 88 million won.
The changes are expected to help 1.16 million business owners, with each saving 300,000 won to 1.2 million won on the value-added taxes they pay.
Additionally small- and medium-sized enterprises in the Daegu and North Gyeongsang regions will be getting 30 to 60 percent cuts in their income and corporate taxes, up from an initial government proposal of 15 to 30 percent.
President Moon Jae-in on Tuesday stressed that the supplementary budget is not the end of government support, but the beginning.
During a cabinet meeting, Moon announced a plan to establish an emergency economic council, which he will head.
Moon said he will personally oversee bold measures and their swift execution.
“The current situation is much more serious than the 2008 global financial meltdown,” Moon said. “As president I recognize the seriousness of the current situation.”
He said the emergency economic council and the Central Disaster and Safety Countermeasures Headquarters will act as the two pillars of the government’s response to the crisis.
“We are not in a position where we have a lot of options,” Moon said. “We have to use all resources and means at our disposal if they can be effective.”
The government’s urgency is obvious after the central bank unexpectedly cut the interest rate to an all-time low on Monday, following cuts by the U.S. Federal Reserve on Sunday.
On Tuesday, the Kospi lost 42.42 points or 2.47 percent to reach 1,672.44, its lowest level since Oct. 5, 2011, when the market closed at 1,666.5.
The market fell for the fifth consecutive day despite the interest rate cuts.
The Kospi started the day nose-diving 70 points or 4 percent compared to the previous day as foreign investors offloaded stocks.
U.S. President Donald Trump’s comment on the U.S. economy possibly entering a recession and forecasting that the coronavirus situation could last until August didn’t help.
In the 12 trading days of this month, the Kospi lost 330 points or 16 percent.
When compared to the beginning of this year, the Kospi has lost 500 points or 23 percent.
BY LEE HO-JEONG [firstname.lastname@example.org]
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