SEOUL: South Korea on Thursday proposed a second supplementary budget for this year worth 7.6 trillion won (RM27 bil) to fund cash payments promised to low- and middle-income families to ease the economic impact of the coronavirus outbreak.
The nation’s Finance Ministry said the new extra budget will be funded without issuing additional deficit-covering bonds, but by reallocating money from some of the existing budget for public projects and the foreign exchange stabilisation fund.
The entire 7.6 trillion won will be used to pay families below the top 30 percentile of income, with some four-person households getting about 1 million won.
All up, the aid package is worth 9.7 trillion won, larger than the initial 9.1 trillion won promised by President Moon Jae-in.
Other measures announced in recent weeks include an emergency interest rate cut, an extra 11.7 trillion won budget, plus a 100 trillion won economic rescue package to save companies and put a floor under crashing stocks and bond markets.
“The government will make an all-out effort to respond boldly and swiftly in terms of fiscal, tax and financial policies until this crisis is over,” Finance Minister Hong Nam-ki told a briefing.
In addition to the extra budget, the government will review measures to minimise bankruptcies and unemployment, and to support the economy’s resilience, Hong added.
A growing number of economists expect the South Korean economy to contract this year due to the virus. During the global financial crisis of 2008, South Korea still managed 0.8% growth but it contracted 5.1% in 1998 during the Asian financial crisis.
Last week, the Bank of Korea governor Lee Ju-yeol said another interest rate cut could be necessary as the bank sees the economy growing less than 1% this year, below its earlier projection of 2.1%.
The virus has infected around 10,600 people nationwide and killed more than 200. More than 2 million have been infected globally, according to a Reuters tally.
Job losses are mounting as the virus upends businesses from airlines to manufacturing and services sectors.
Labour Ministry data on Monday showed the government paid 0.9 trillion won in unemployment benefits to around 608,000 people in March, the largest amount on record. Statistics Korea is due to report official unemployment data on Friday.
South Korea can draw up an extra budget when there is a war or large-scale disaster outbreaks, or when there are concerns over economic recessions and mass lay-offs.
This year marks the sixth consecutive year for South Korea to propose an extra budget for stimulus.
To ensure the cash handouts reach citizens as soon as possible, the ministry plans to submit the bill later on Thursday. – April 16, 2020, Reuters
