Businesses to get lion's share of front-loaded 3 trillion won

A restaurant at a major mall in Yeongdeungpo, western Seoul, on Sunday. With the number of cases remaining above 600, the government raised the social distancing level. [YONHAP]

Businesses are the target of an 11th-hour, front-loaded, 3-trillion-won ($2.8 billion) government relief measure as they are being hit by the increase in the social distancing level, Finance Minister Hong Nam-ki said.

On Sunday, the government announced a raising of the social distancing regulation for three weeks, to Level 2.5 in the Seoul metropolitan are. For the last two days, the daily confirmed cases in the country exceeded 600.

“The number of confirmed cases is not subsiding due to the third outbreak of the coronavirus,” Hong said, stressing the urgent need for measures to reduce the damage caused by the latest wave.

“Depending on how the coronavirus situation develops, we plan to execute 3-trillion-won plus [of fiscal policy] that is customized to areas that are affected.”

The government was able to access 3 trillion won of emergency relief funds budgeted for next year. The budget was approved by the National Assembly on Dec. 2, the legal deadline.

The Finance Minister stressed the importance of this month.

“We have less than three weeks” before the end of the year, Hong said. “It is an important month that bridges this year’s efforts in overcoming the Covid-19 crisis and next year’s recovery.”

“We can’t waste any time in using whatever fiscal policies we have for this year and stimulating spending and investment in the private sector.”

He then stressed that the best vaccine at this point is a strict quarantine of the virus.

A state-owned think tank also raised alarm on the recent spike of Covid-19 infections.

In its latest report, the Korea Development Institute (KDI) noted that while the impact of the virus is limited on manufacturing, services, which are more exposed, started contracting again since mid-November.

According to Shinhan Card, credit card spending between Nov. 17 and Nov. 29, which is when the government raised the social distancing regulation, is estimated to have declined 8.8 percent compared to the same period a year ago. This is sharper than the 1.1 percent decline between Nov. 1 and Nov. 16 before the stricter social distancing was applied.

KDI noted that with social distancing raised again, consumer spending could be affected. This in turn hit growth.

Many institutions, including the Organisation for Economic Cooperation and Development (OECD), have projected Korea’s economy to decline in the 1 percent range in 2020, which is relatively better than other countries.

The Bank of Korea on Nov. 26 also raised its outlook for this year from a 1.3 percent contraction to a 1.1 percent contraction.

BY LEE HO-JEONG [lee.hojeong@joongang.co.kr]