Injection of 31 Trillion Won to Stabilize Stock and Bond Markets

Hong Nam-ki, Deputy Prime Minister for Economic Affairs, is delivering opening remarks at the 'Second Half Economic Policy Direction and 3rd Supplementary Budget Party-Government Meeting' held at the National Assembly on the 1st. Photo by Yoon Dong-joo doso7@

[Asia Economy Reporter Kwangho Lee] The Democratic Party of Korea and the government decided on the 1st to prepare the third supplementary budget (supplementary budget) as the largest single supplementary budget ever. This is because rapid and bold fiscal investment is necessary to overcome the COVID-19 pandemic early and prepare for the upcoming post-COVID era. President Moon Jae-in presided over the '2020 National Fiscal Strategy Meeting' on the 25th of last month, emphasizing the need to mobilize all fiscal capabilities by saying, "When putting out a fire, pouring enough water early and initially can lead to a faster extinguishing and prevent greater damage."

On the same day, the party and government held the '2020 Second Half Economic Policy Direction and 3rd Supplementary Budget Party-Government Consultation,' agreeing to maintain an expansionary fiscal policy stance. To this end, they decided to expand the supply scale of financial services for ordinary citizens, effectively reform the basic investment tax credit, and accelerate the execution of new private investment projects. Financial support such as interest extensions and maturity deferrals will also be strengthened. Plans are also in place to steadily implement the so-called 'Korean New Deal' policy and strengthen customized support by industry in advanced sectors.

First, the party and government agreed to expand the contribution to the Korea Credit Guarantee Fund to provide emergency funds of 10 trillion won to support small business owners facing liquidity crises due to decreased sales. Currently, the government supports policy finance programs in response to the spread of COVID-19, and it has been found that the utilization rate of policy finance for low-credit small business owners reaches 98%. On the other hand, the utilization rate for mid-sized and large companies is low, leading to many calls for support to be provided appropriately. The National Assembly Budget Office recently evaluated in its 'NABO Economic and Industrial Trends & Issues May Issue: Status of Policy Finance Support in Response to COVID-19' report that "as of the end of April, the application for programs supporting low-credit individuals surged, making it insufficient to resolve the urgent financial difficulties of small business owners and micro-enterprises."

In particular, the government plans to expand corporate bond guarantees for companies experiencing liquidity difficulties due to COVID-19 and invest 20 trillion won in purchasing non-investment grade corporate bonds and commercial papers (CP). Contributions to the Korea Trade Insurance Corporation will also increase to expand liquidity for export companies. A total of 30.7 trillion won will be invested in the Bond Market Stabilization Fund and the Securities Market Stabilization Fund. Through this, the plan is to increase liquidity supply and ease the financial strain on companies.

Additionally, by relaxing the conditions for unpaid leave, the target for employment retention subsidies will be expanded by 580,000 people, and 550,000 emergency jobs will be supplied through non-face-to-face jobs, youth digital jobs, and special hiring subsidies. Subsidies and loan support for artists, athletes, and national veterans will also be expanded.

Regarding the Korean New Deal projects, including the Green New Deal, the government plans to complete 'Green Remodeling' by 2022, which involves reinforcing old public buildings built 15 to 30 years ago with high-efficiency insulation materials and ventilation systems. The transition to eco-friendly vehicles for 122,000 diesel freight vehicles and 28,000 children's school vehicles will also be implemented by 2022.

To promote the Digital New Deal project, ultra-high-speed internet networks will be established in 650 rural fishing villages and remote areas without internet access, intelligent transportation systems will be introduced on major arterial roads, and IoT sensors for electrical equipment will be installed on all railroads.

Furthermore, to expand public Wi-Fi, which was the Democratic Party's first pledge in the April 15 general election, public Wi-Fi will be gradually installed in 41,000 public places nationwide by 2022. Onnuri gift certificates and local love gift certificates, aimed at revitalizing the local economy, will be additionally issued with a 10% discount, amounting to 2 trillion won and 3 trillion won respectively.

In addition, the party and government decided to raise the free influenza vaccination target age from 14 to 18 years old to prevent the spread of COVID-19 and include an additional 2.35 million people in the free vaccination target, reflecting the budget accordingly.

The party and government plan to submit the supplementary budget bill reflecting these contents to the National Assembly on the 4th and promptly process it during the June extraordinary session.

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