5th supplementary budget details almost hammered out

Economy

Published: 22 Feb. 2021, 14:59 Updated: 22 Feb. 2021, 19:34

5th supplementary budget details almost hammered out

Small shop owners, including those who own indoor gyms, demand the government create a measure that would compensate for losses incurred due to the strict social distancing rather than a universal emergency relief grant in front of the government complex in Seoul on Feb. 22. [YONHAP]

The Democratic Party and the government are currently in negotiations over the fifth supplementary budget since the Covid-19 outbreak.

The plan is to reach an agreement this week so that it could be turned over to the National Assembly to be put to a vote next month.

On Monday, Finance Minister Hong Nam-ki, Blue House policy chief Kim Sang-jo and head of the Democratic Party (DP) policy committee Hong Ik-pyo gathered to discuss the supplementary budget, which will include the fourth emergency relief grant targeting struggling small shops and low-income households.

Although the Finance Minister has remained cautious as to the size of the supplementary budget, there’s growing speculation that it could be around 15 trillion won ($12.9 billion). That’s about half of the initial estimate proposed by the ruling party.

In exchange for giving up its position of an emergency relief grant for all, the DP may be raising the amount given to each small business to around 4 to 5 million won.

In the second emergency relief grant, the small self-employed business owners received 2 million won. In the third, which has been handed out since the beginning of this year, the maximum was 3 million won.

Additionally, the ruling party is asking the government to increase the number of emergency grant recipients from the 2.8 million in the last round, which the government is favorably considering.

Until now, businesses eligible for the relief grants were small shops with annual revenue below 400 million won.

The DP is asking the bar to be raised to 1 billion won.

Finance Minister Hong while attending a hearing of lawmakers a week ago said the government is reviewing the possibility of revising the eligibility to above 400 million won in annual revenue.

“The definition of small shops is those whose annual revenue is below 1 billion won, and most are below 400 million won,” Hong said. “However, we are considering [raising the bar] to 1 billion won as even those [with annual revenue of below 1 billion won] are struggling.”
The government and the ruling party are also said to be discussing an easing of other eligibility conditions, including limiting the relief grant access only to manufacturers with fewer than 10 employees and for service businesses with fewer than five.

Initially, the DP was reported to have proposed a minimum 30 trillion won fourth emergency relief grant with distributions made to all Koreans, much like in the second supplementary budget, in which between 400,000 won to 1 million won was handed to each and every Korean.

The DP gave into the strong opposition from Finance Minister Hong, who claimed that the support should be targeted to specific groups in need considering the growing national debt.

OECD chief Angel Gurria in a press briefing last week supported targeted support, giving weight to Finance Minister Hong’s position.

“Targeted support measures for those who need it most will have greater multiplier effects, imparting a greater boost to private consumption compared to across-the-board support to all families,” Gurria said. “The challenge, as always, is to agree on who exactly should be targeted and how much help is called for, but clearly some degree of targeting is warranted.”

In addition to the emergency relief grant, there’s also speculation that 2 to 3 trillion won for subsidizing businesses to help prevent layoffs will be included in the supplementary budget as well as government financial aid to freelancers and door-to-door sales people.

President Moon Jae-in during a cabinet meeting a week ago asked the government to include a sufficient amount of job-related support in the fourth emergency relief grant to help the job market.

According to Statistics Korea, in January nearly 1 million jobs were lost compared to a year earlier, which is the largest job loss since December 1998.

BY LEE HO-JEONG, IM SOUNG-BIN [lee.hojeong@joongang.co.kr]