4th Supplementary Budget of 7.8 Trillion Won in 59 Years... Concerns Over Fiscal Soundness and National Credit (Comprehensive 2)

3.8 Trillion KRW Support for Small Businesses and SMEs, 1.4 Trillion KRW for Employment Stability
400 Billion KRW for Low-Income Livelihood Support, 2.2 Trillion KRW for Emergency Care
Total Expenditure 554.7 Trillion KRW, Up 18.1% YoY... National Debt Ratio 43.9%
Prime Minister Jeong: "Quick Delivery to Those Most in Need... Selective Support Unavoidable"

Prime Minister Chung Sye-kyun is speaking at the temporary Cabinet meeting held at the Government Seoul Office in Jongno-gu, Seoul on the 10th. Photo by Hyunmin Kim kimhyun81@

[Asia Economy Reporter Kwangho Lee] The 4th supplementary budget bill (supplementary budget) worth 7.8 trillion won to provide the 2nd customized emergency disaster relief fund in response to the resurgence of the novel coronavirus infection (COVID-19) was reviewed and approved at an extraordinary Cabinet meeting on the 10th. The government plans to submit the supplementary budget bill to the National Assembly tomorrow morning, and Prime Minister Chung Sye-kyun is expected to deliver a policy speech on the supplementary budget at the National Assembly next week.

On the same day, the government finalized the composition of the 4th supplementary budget at the 8th Emergency Economic Meeting chaired by President Moon Jae-in in the morning, and held an extraordinary Cabinet meeting chaired by Prime Minister Chung in the afternoon to review and approve the '2020 4th Supplementary Budget' worth 7.8 trillion won for the payment of disaster relief funds.

◆ Customized support for COVID-19 damage targets = The 4th supplementary budget provides customized support to small business owners, vulnerable employment groups, households in livelihood crisis, and those with childcare burdens, who are most affected by the resurgence of COVID-19. Unlike the 1st disaster relief fund (2nd supplementary budget) paid to all citizens, it helps urgently needed groups.

First, about half of the 7.8 trillion won in the 4th supplementary budget, 3.8 trillion won, will be paid as New Hope Funds to small business owners and self-employed people who suffered damage due to social distancing measures. For general businesses with annual sales of 400 million won or less that experienced a decrease in sales after the COVID-19 resurgence, 1 million won will be paid each. For 'restricted gathering businesses' such as restaurants and coffee shops that face operating hour restrictions, 1.5 million won will be given, and for 'prohibited gathering businesses' such as PC rooms, academies, and reading rooms, 2 million won will be provided. Payments to restricted and prohibited gathering businesses will be made regardless of sales size or sales decline. The recipients of the New Hope Fund number 2.91 million, accounting for 86% of all small business owners.

Closed small business owners will receive a 500,000 won incentive for reopening closed stores. Existing small business financial support programs will also be remodeled. The first-stage financial support program will lower the threshold for academies and PC rooms, and the second program will increase the support limit from 10 million won to 20 million won. The application period for the 'Good Landlord' tax support, which provides a 50% tax credit on income and corporate tax for rent reductions, will be extended by six months from the first half of this year to the end of the year.

The government will also invest a total of 1.4 trillion won to protect 1.19 million jobs. For 700,000 special employment workers and freelancers whose income has decreased, the 2nd emergency employment stabilization fund of 500,000 to 1.5 million won will be provided. Among them, 500,000 people who received the 1st support fund (1.5 million won) will receive an additional 500,000 won before Chuseok without separate screening, and 200,000 new people whose income decreased during this resurgence will receive 1.5 million won (500,000 won × 3 months).

In addition, the existing worker employment retention subsidy system will be extended and expanded to support an additional 240,000 people, and 200,000 young people (aged 18?34) facing employment difficulties will receive a special job-seeking support fund of 500,000 won.

Furthermore, the safety net for crisis households will be expanded. An emergency livelihood support program will be activated for households in livelihood crisis due to unemployment or business suspension. Conditions will be relaxed compared to the existing emergency welfare system, and a one-time payment of up to 1 million won for households of four or more (400,000 won for one-person households, 600,000 won for two-person households, 800,000 won for three-person households) will be provided.

A support program for emergency childcare, which has rapidly increased due to the spread of COVID-19, will also be activated. The special childcare support target, which provides 200,000 won each, will be significantly expanded from children under 7 years old to elementary school students. Adding 2.52 million preschool children and 2.8 million elementary school students increases the target to 5.32 million.

As non-face-to-face activities have surged among many citizens, 46.4 million people aged 13 and over will receive a 20,000 won reduction in communication fees.

◆ Full issuance of government bonds... concerns over soundness and national credit = The funding will be secured by 7.5 trillion won in government bonds and 300 billion won in small and medium enterprise promotion bonds. To ensure rapid project execution, 100% of the support will be provided from the national treasury without local government burden.

Accordingly, total revenue is expected to be 470.7 trillion won, the same as the 3rd supplementary budget, and total expenditure will increase by 18.1% from the previous year to 554.7 trillion won.

The integrated fiscal balance, which is total expenditure minus total revenue, is expected to show a deficit of 84 trillion won. The management fiscal balance, excluding various social insurances from the integrated fiscal balance, is expected to increase by 81 trillion won from the previous year (main budget 37.6 trillion won) to 118.6 trillion won.

With the full issuance of deficit government bonds, this year's national debt will increase to 846.9 trillion won, and the national debt ratio to GDP (gross domestic product) will rise to 43.9%. If GDP contracts this year, the national debt ratio is expected to exceed 45%, which will likely burden future fiscal soundness and national credit rating management.

This 4th supplementary budget is the first in 59 years since the May 16 military coup in 1961.

Hong Nam-ki, Deputy Prime Minister and Minister of Economy and Finance, said, "There were diverse opinions on whether to support thinly and widely or thickly where needed, between universal support and customized support, but the consensus was to support more thickly where needed," adding, "It is not selective but 'focused,' and not differential but 'customized,' and I humbly ask the public to kindly understand this."

Prime Minister Chung said, "We will prepare so that the supplementary budget is quickly delivered to those who are most struggling," emphasizing, "We will support those whose sales have sharply declined or who have faced business restrictions due to strengthened social distancing to get back on their feet."

He continued, "Since everyone is going through difficult times, those excluded from the support targets will likely feel disappointed and regretful," explaining, "We want to give to all citizens, but considering limited resources, it was an unavoidable choice to support thickly focusing on those who suffered greater damage rather than giving small amounts to everyone."

He urged, "Once again, the generous understanding and cooperation of the public are needed."

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