[Weekly Review] As COVID-19 Prolongs... Government Increases Care Support and Advances Prepayments

Government Struggles to Boost Domestic Demand with Various Support Measures
Fiscal Warnings and Employment Indicators Decline Since Early Year

On the 10th, residents of the jjokbangchon struggling due to the novel coronavirus disease (COVID-19) lined up in front of the jjokbang counseling center in Donui-dong, Jongno-gu, Seoul to receive free meals provided by the Salvation Army. This event was organized to comfort jjokbangchon residents who have been unable to go outside and have faced a reduction in free meals due to COVID-19. Photo by Kim Hyun-min kimhyun81@

[Sejong=Asia Economy Reporter Kim Hyun-jung] As the novel coronavirus infection (COVID-19) crisis prolongs, the government is focusing on circulating money in the market through advance payments while doubling support for family care expenses, which have seen a surge in demand. It has also decided to extend the payment deadlines for city gas bills for small business owners and vulnerable groups facing difficulties.

However, employment indicators have shown a sharp deterioration, with the number of unemployed continuously increasing, and fiscal conditions have triggered warning signs since the beginning of the year.

◆ Family Care Leave Support Up to 10 Days and 500,000 KRW = On the 9th, the government announced at the 14th Economic Ministers' Meeting on COVID-19 Response and the 4th Crisis Management Meeting that the payment period for family care expense support would be extended from a maximum of 5 days to 10 days. The support amount was also increased from up to 250,000 KRW per person to 500,000 KRW (1,000,000 KRW combined for couples).

The family care expense support program provides subsidies to workers who take leave due to illness, accidents, or child-rearing reasons. Originally, unpaid leave could be taken for up to 10 days, but to alleviate workers' financial burdens, the Ministry of Employment and Labor began accepting applications for support payments last month. Workers raising children aged 8 or younger (2nd grade in elementary school) receive 50,000 KRW per day. According to government policy, the total support amount available can increase to 1,000,000 KRW when combined for couples. Additionally, workers with children entering 3rd grade this year can receive support for leave taken during the online school opening period. Workers who have already used all 10 days of family care leave can also apply retroactively.

Application documents and procedures have been simplified. If a worker has used 10 days of family care leave but applied for support for only 5 days and has not yet received payment, they can simply supplement the leave usage days on the employer's confirmation form and resubmit. The project budget will be 53 billion KRW, combining the previously allocated contingency fund of 21.3 billion KRW with an additional 31.6 billion KRW, and benefits are expected for a total of 120,000 households.

The government also announced additional support measures by industry. Traffic inducement charges imposed on department stores, marts, tourism and cultural facilities, and electric facilities will be reduced by 30% for this year's assessments (approximately 120 billion KRW reduction based on 2019). Road and river occupancy fees paid by private operators will be temporarily reduced by 25%. The apron usage fees paid by ground handling companies to airport corporations for storing work equipment at airports will be increased from the existing 20% discount to 100%.

◆ Government-Led Advance Payment Campaign = The government is also institutionalizing the 'advance payment good consumption' movement spreading in the private sector. The intention is to quickly bolster demand in affected industries, mainly in the public sector, and encourage private participation to prevent a consumption cliff amid rapidly shrinking domestic demand.

The government plans to make early purchases worth 800 billion KRW in the first half of the year, focusing on assets that can be stockpiled, such as 10,000 smart devices to support vulnerable students for online school openings, old desks and chairs, blackboards, school supplies, quarantine and hygiene materials, medicines, and supplies and consumables needed for safety, testing, inspection, and maintenance related to public institutions' core projects.

Similarly, 90 billion KRW in business promotion expenses will be prepaid to dining establishments, and 80% (160 billion KRW) of remaining international travel tickets will be prepaid. The tickets, which are not route-specific, must be used within this year, with balances settled by the end of the year.

Contracts for postponed or second-half planned international events, meetings, and local festivals will also be signed early, with up to 80% (140 billion KRW) prepaid. Outsourced service contracts for public institution maintenance and repairs will be signed early, spending 510 billion KRW in advance. The central government will expand the full execution of customized welfare points used in culture, leisure, and dining sectors within the first half of the year to local governments and public institutions. This cost is expected to be 190 billion KRW.

Additionally, to support the automobile industry facing demand declines and other difficulties, about 1,600 business vehicles planned for purchase in the second half will be bought in the first half (50 billion KRW), and 150,000 barrels of domestically produced diesel and 490,000 barrels of crude oil will also be purchased early in the first half (31 billion KRW). Some of the mask stockpiles planned for purchase in the second half (supplementary budget of 70 billion KRW) will be contracted early in the first half, with up to 80% (45 billion KRW) prepaid. Furthermore, 70% (50 billion KRW) of operating expenses for rental-type private facilities (BTL) such as national university dormitories and military facilities scheduled for the second half will be paid in advance.

On the 10th, an unemployment benefit applicant is receiving counseling at the Western Employment Welfare Plus Center in Mapo-gu, Seoul. Photo by Mun Ho-nam munonam@

◆ Payment Deferral for City Gas Bills for Small Business Owners and Vulnerable Groups = The government has decided to defer payment of city gas bills for small business owners and vulnerable groups for the April to June period by three months. On the 9th, the Ministry of Trade, Industry and Energy announced this measure targeting small business owners nationwide using city gas and households eligible for residential rate reductions. Eligible households include ▲basic livelihood security recipients (living, medical, housing, education benefits) ▲severely disabled persons ▲independence patriots and disabled veterans ▲near-poverty groups ▲multi-child families ▲those issued near-poverty confirmation certificates, among others.

The application period for payment deferral is from the 16th of this month to the 15th of next month. Applications can be made through the call centers and websites of the respective city gas companies. For those eligible, the payment deadlines for city gas bills starting from April will be extended by three months each for three months' worth of bills. If the April bill has already been paid, the payment deadlines for May to July bills can be extended. No late fees will be charged during the extension period.

Additionally, the deferred bills can be paid in equal installments until the end of the year to prevent a sudden financial burden.

◆ Fiscal Red Warning Lights... Employment Indicators Also Worsen = Although there is a long way to go, fiscal conditions have triggered warning signs since the beginning of the year. According to the '2019 Fiscal Year National Settlement' announced by the government on the 7th, last year's managed fiscal balance was a deficit of 54.4 trillion KRW, an increase of 43.8 trillion KRW compared to the previous year. The managed fiscal balance is the integrated fiscal balance (a deficit of 12 trillion KRW), which is total revenue minus total expenditure, excluding social security fund balances such as national pension and employment insurance (42.4 trillion KRW last year), and is the best indicator of the government's actual fiscal condition. This deficit is the largest in about 20 years since this indicator began to be compiled in 1990.

Last year's national budget deficit was 10 trillion KRW more than the previous record of 43.2 trillion KRW recorded during the 2009 financial crisis. As a percentage of GDP, it was -2.8%, also the largest since the financial crisis (-3.6%). Central and local government debt (D1) rose by 48.3 trillion KRW from the previous year to 728.8 trillion KRW, surpassing 700 trillion KRW for the first time. However, the national debt ratio to GDP was 38.1%, similar to the previous year. The fiscal deficit last year was mainly due to a sharp increase in non-tax revenue and expenditure caused by the transfer of global surplus funds to local governments (10.5 trillion KRW). Additionally, worsening tax revenue conditions due to the recession and other factors caused a tax revenue shortfall. Last year's tax revenue was 1.3 trillion KRW less than initially expected due to decreased corporate tax from poor corporate performance, marking the first tax revenue shortfall in five years since 2014.

According to the 'April Fiscal Trend' announced by the Ministry of Economy and Finance on the same day, as of the end of February, the cumulative integrated fiscal balance was a deficit of 26.2 trillion KRW, and the managed fiscal balance was a deficit of 30.9 trillion KRW. National debt (central government basis) at the end of February was 725.2 trillion KRW, an increase of 13.5 trillion KRW from the previous month. This is the largest monthly increase since the monthly fiscal trend reports began in January 2014.

The employment situation is also unfavorable. According to employment insurance statistics, unemployment benefit payments in February reached a record high of 808.3 billion KRW. This is the first time monthly unemployment benefit payments have exceeded 800 billion KRW. It increased by 28% compared to the same month last year (632.4 billion KRW). In February, 107,000 people newly received unemployment benefit support. The most affected group was middle-aged and older adults. By age, those in their 50s numbered 27,000, the highest. Next were those aged 60 and above (22,000), 40s (20,000), 30s (19,000), and 20s (18,000). Examining reasons for unemployment, 42,300 people left due to company downturns and restructuring, an increase of 7,100 compared to the same month last year (35,200). About 4,400 people lost jobs due to business closures and bankruptcies.

By industry, manufacturing had the highest number at 18,500, followed by construction with 16,500, business facility management and service industries with 12,400, and wholesale and retail trade with 12,000. By workplace size, the most unemployed were at businesses with fewer than 5 employees (24,800), but even large companies with over 1,000 employees had 13,200 unemployed. In fact, mass unemployment began to surge from February.

This content was produced with the assistance of AI translation services.