Government to Release 12.4 Trillion KRW+α in 4th Supplementary Budget and Economic Boost Package (Comprehensive Report 3)

Focus on Customized Support... Supplementary Budget of 7.8 Trillion Won Formulated
4.6 Trillion Won + α for Quarantine and Economic Reinforcement
First 4th Supplementary Budget in 59 Years... 7.5 Trillion Won in National Bond Issuance... Fiscal Soundness 'Concerns'

[Image source=Yonhap News]

[Sejong=Asia Economy Reporter Kim Hyun-jung] The government has announced disaster relief and economic stimulus measures totaling more than 12.4 trillion won by combining the 4th supplementary budget (supplementary budget) and the administration's own resources. Up to 2 million won will be provided to small business owners affected by the spread of the novel coronavirus infection (COVID-19), and up to 1 million won in living expenses will be paid to low-income households. While reducing unused and unexecuted budgets and raising the fiscal execution rate to support domestic demand recovery and people's livelihoods, quarantine measures will also be strengthened using contingency funds and others.

On the 10th, the government held an emergency economic meeting and announced a comprehensive plan with these contents. First, the 4th supplementary budget, including selective second disaster relief payments, was organized on a scale of 7.8 trillion won. 7.5 trillion won will be raised through government bond issuance, and 300 billion won through bond issuance by the Small and Medium Business Corporation.

Focus on tailored support... 7.8 trillion won supplementary budget organized

This supplementary budget is targeted at small business owners, vulnerable employment groups, households in livelihood crisis, and childcare burden households, where damage is concentrated due to the resurgence of COVID-19, unlike the first disaster relief payment (second supplementary budget) which was nationwide. 3.8 trillion won will be provided to small business owners and SMEs. To stabilize the management of small business owners hit by social distancing, the 'Small Business New Hope Fund' is newly established with 3.2 trillion won (2.91 million people) in support. Additionally, 100 billion won (200,000 people) for closed store re-challenge incentives, 10.3 trillion won (590,000 people) for 1st and 2nd stage financial support for small business owners, 2 trillion won (8,000 companies) for special credit loans for SMEs, and 300 billion won (2,000 companies) for emergency management stabilization loans will be invested.

1.4 trillion won (1.19 million people) will be spent to respond to employment shocks caused by the prolonged COVID-19 situation. This includes 500 billion won (240,000 people) for worker employer support funds, 600 billion won (700,000 people) for the second emergency employment stabilization support, 100 billion won (200,000 people) for the youth special employment support program, 200 billion won (28,000 people) for job-seeking benefits, and 100 billion won (24,000 people) for COVID-19 overcoming jobs.

400 billion won (890,000 people) has been allocated for emergency livelihood support for low-income households. 350 billion won (550,000 households) will be used for the newly established 'Emergency Livelihood Support' targeting households in livelihood crisis due to the COVID-19 resurgence, and 30 billion won (5,000 people) for the newly established Tomorrow Kiwoom jobs.

Additionally, a budget of 2.2 trillion won has been set aside to support care gaps. This includes 1.1 trillion won (5.32 million people) for special child care support, 60 billion won (125,000 people) for emergency family care leave expenses support, 20 billion won (20,000 people) for indirect labor cost support for flexible work systems, 900 billion won (46.4 million people) for nationwide mobile communication fee support for those aged 13 and over, and 100 billion won for purpose-specific contingency funds.

4.6 trillion won + α spent on quarantine and economic reinforcement

Ahead of the Chuseok peak season, on the 9th, officials are waiting to load fruit boxes at Garak Agricultural and Marine Products Market in Songpa-gu, Seoul, as agricultural product prices are soaring due to the recent monsoon season. Photo by Kang Jin-hyung aymsdream@

The government also announced quarantine and economic reinforcement measures worth 4.6 trillion won + α using its own resources on the same day.

To introduce overseas COVID-19 vaccines, 100 billion won in advance payments has been secured, and an additional 100 billion won will be allocated for diagnostic test support in preparation for an increase in confirmed cases. Resources of 100 billion won have also been secured for temporary living facilities, treatment centers, clinics, and treatment costs for isolation treatment. Compensation support funds for medical institutions (200 billion won) and management stabilization funds (100 billion won) will also be expanded.

The government plans to increase the effectiveness of economic recovery by enhancing the proactiveness and speed of fiscal execution. The execution rate of major projects in the 3rd supplementary budget will be raised to 80% by the end of September, and 1 trillion won will be additionally executed for this purpose. Public institutions will fully execute the planned investment amount for this year (60.5 trillion won) and advance 1 trillion won from next year's plan to the 4th quarter of this year.

In early next month, plans to revitalize non-face-to-face and online exports will be prepared, and online marketing for export products will also be supported.

During the Chuseok holiday period, infectious disease-dedicated hospitals, living treatment centers, and screening clinics will be operated continuously to maintain the medical system. Three measures including discounted mask sales, distribution to vulnerable groups, and crackdowns on hoarding will be implemented simultaneously.

To stabilize prices for ordinary citizens, the supply of major Chuseok seasonal products will be expanded by 1.3 times focusing on 10 major items, and a related sales promotion campaign will be conducted following the increase of the gift allowance under the Improper Solicitation and Graft Act (Kim Young-ran Act) from 100,000 won to 200,000 won for agricultural, fishery, and processed agricultural products.

Meanwhile, the government plans to submit the 4th supplementary budget bill including these contents to the National Assembly on the 11th and provide on-site support before the Chuseok holiday.

First 4th supplementary budget in 59 years... 7.5 trillion won in government bonds

As the government significantly increases response support in a national disaster situation, concerns about fiscal soundness deterioration arise. Most of the resources for this 4th supplementary budget, 7.5 trillion won, will be raised through government bond issuance. This is the first time in 59 years since the May 16 military coup in 1961 that the government has organized a 4th supplementary budget.

Accordingly, this year's total national revenue will reach 470.7 trillion won, total expenditure 554.7 trillion won, and the integrated fiscal balance deficit, which is the difference between total revenue and total expenditure, will increase by 7.8 trillion won from the previous 3rd supplementary budget to 84 trillion won. The integrated fiscal balance deficit is expected to rise from 3.9% to 4.4% of GDP, an increase of 0.5 percentage points during the same period.

The managed fiscal balance deficit, which excludes the four major social security funds such as the National Pension and Employment Insurance funds from the integrated fiscal balance to show the government's actual fiscal status, is expected to reach 118.6 trillion won, equivalent to 6.1% of GDP. This is 7.1 trillion won and 0.3 percentage points worse than at the time of the 3rd supplementary budget, and it is the first time that the managed fiscal balance deficit ratio has recorded above 6%.

The net increase in national debt is expected to rise from 98.6 trillion won at the time of the 3rd supplementary budget bill preparation to 106.1 trillion won. The national debt ratio will increase from 43.5% to 43.9% of GDP. If the Korean economy records negative growth, falling below this year's government forecast (0.1%), the denominator (GDP) used to calculate the debt ratio will decrease, and the national debt ratio could approach 45%.

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