[Weekly Review] 'Policy-type Korean New Deal Fund' 20 Trillion Won... Government "Effectively Principal Guaranteed"

Deputy Prime Minister and Minister of Economy and Finance Hong Nam-ki and Financial Services Commission Chairman Eun Sung-soo are announcing the 'Korean New Deal Financial Support Plan' at the government Seoul office briefing room on the 3rd. Photo by Moon Ho-nam munonam@

[Sejong=Asia Economy Reporter Joo Sang-don] The core of the Korean New Deal Fund creation plan announced by the government on the 3rd is the 'establishment of a policy-type New Deal Fund.' The plan is to create a parent fund funded by the government and a child fund with private capital, with the parent fund bearing the initial investment risk to maximize the returns for private participants.

Hong Nam-ki, Deputy Prime Minister and Minister of Economy and Finance, presented three pillars of the Korean New Deal Fund: ▲ establishment of a policy-type New Deal Fund ▲ fostering New Deal infrastructure funds ▲ revitalizing private New Deal funds.

The policy-type New Deal Fund consists of a parent fund, funded by the government and policy financial institutions with a total of 7 trillion won (3 trillion won and 4 trillion won respectively), and a child fund with 13 trillion won from private capital. The total fund size is 10 trillion won. The government plans to include 600 billion won of government contributions in next year's budget. When the child fund is created, the parent fund's capital will be matched.

To encourage private investment, the government and policy financial institutions will take a subordinated position in the parent fund, bearing the investment risk first. Since returns are distributed starting from the senior tranche, private investors participating in the senior tranche can earn higher returns.

Deputy Prime Minister Hong explained, "In the case of the policy-type New Deal Fund, policy finance typically covers about 35% of subordinated bonds first, which is effectively similar to a guarantee in nature and effect."

◆ 170 billion won invested in COVID-19 treatment and vaccine development = The government plans to concentrate 48.5% of next year's research and development (R&D) budget on six areas: the Korean New Deal, infectious diseases, materials/components/equipment, BIG3 (Biohealth, Future Cars, System Semiconductors), basic fundamental R&D, and talent development. In particular, 170 billion won will be invested solely in the development of treatments and vaccines for the early overcoming of COVID-19.

On the 4th, the Ministry of Economy and Finance announced that out of the 27.2 trillion won R&D budget for next year, 247.8 billion won is allocated for responding to COVID-19 and other new and mutated infectious diseases. This is an increase of 56.2 billion won (29.3%) compared to this year's budget of 191.6 billion won, which included supplementary budgets.

About 70% of the infectious disease response budget, 170.7 billion won, will be directly used to support COVID-19 treatment and vaccine development. This includes full-cycle support from candidate substance discovery (31.9 billion won), non-clinical trials using primates for efficacy and toxicity evaluation (7.4 billion won), to clinical phases 1 to 3 for efficacy and safety verification (131.4 billion won). Additionally, 42.5 billion won will be invested in expanding R&D research infrastructure such as the Virus Research Resource Center necessary for infectious disease research and treatment/vaccine development, and 26.2 billion won will be invested in advanced demonstration support and performance improvement for quarantine supplies and in vitro diagnostic devices.

◆ Vegetable prices surge... Consumer prices up 0.7% in August = Last month, consumer prices rose 0.7% compared to the previous year, marking the highest increase in five months. The prolonged rainy season, the longest on record, caused vegetable prices to surge, and the impact of COVID-19 also contributed to rising food prices. With typhoons following the rainy season, the upward trend in vegetable prices is likely to continue for some time.

According to the 'August Consumer Price Trends' released by Statistics Korea on the 2nd, the fresh food index rose 15.8% year-on-year, the largest increase since January 2017 (15.9%).

Among fresh foods, fresh vegetables rose 28.6%, fresh fish and shellfish 7.3%, and fresh fruits 7.2%. The increase in fresh vegetable prices is the highest since November 2016 (33.4%). In particular, napa cabbage jumped 69.8% compared to August last year. Sweet potatoes (56.9%), tomatoes (45.4%), and pumpkins (55.4%) also saw sharp price increases.

◆ August exports down 9.9%, daily average down 3.8% = Last month, South Korea's export value recorded 39.66 billion dollars, down 9.9% compared to the same month last year. The daily average export value decreased by 3.8%, showing the smallest decline since the COVID-19 outbreak. The government evaluated that "while major countries' exports were sluggish, we performed relatively well."

According to the 'August Export-Import Trends' announced by the Ministry of Trade, Industry and Energy on the 1st, last month's export value was 39.66 billion dollars, down 9.9% from August last year. The global impact of COVID-19 has caused exports to decline for six consecutive months.

Considering working days, the daily average export value was 1.8 billion dollars. This is the largest since April, when the COVID-19 impact was first reflected in export performance. Monthly daily average export values were 1.65 billion dollars in April, 1.62 billion dollars in May, 1.67 billion dollars in June, and 1.71 billion dollars in July, showing a gradual recovery.

The daily average export value decreased by 3.8% compared to August last year, which is also the smallest decline since COVID-19. Except for January this year, when exports recorded positive growth, this is the best performance since 2019.

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