[Q&A] Hong Nam-gi "If Quarantine Fails, Difficult to Push Consumption Measures... 3.2% Growth Rate Achievable"

January 17 Announcement of '2021 Economic Policy Directions'
"3rd Disaster Relief Fund to Be Paid from January Next Year"

Deputy Prime Minister and Minister of Economy and Finance Hong Nam-ki is announcing the 2021 Economic Policy Direction on the afternoon of the 17th at the Joint Briefing Room of the Government Seoul Office in Jongno-gu, Seoul. Photo by Kang Jin-hyeong aymsdream@

[Asia Economy Reporter Jang Sehee] Hong Nam-ki, Deputy Prime Minister and Minister of Economy and Finance, stated, "The fundamental premise of consumption stimulation measures is consultation with the quarantine authorities, so if it hinders quarantine efforts, it would be difficult to push forward with consumption stimulation measures."

On the 17th, Hong held a briefing on the '2021 Economic Policy Direction' at the Government Seoul Office and said, "We intend to prioritize quarantine first."

Regarding the establishment of quarantine stability standards, he explained, "If standards are set in advance, they may be too rigid, resulting in no quarantine effect and only increasing economic damage."

The following is a Q&A with Deputy Prime Minister Hong.

▲ You decided to increase the income deduction rate if credit card usage exceeds this year’s level. How effective do you expect this to be?

=When using credit cards, income deductions are recognized from 15% to 40%. Next year, if credit card usage increases, we plan to add an additional 10 percentage points to the deduction rate. By additionally recognizing this 10 percentage points, we expect to significantly stimulate private consumption expansion. However, it will be difficult to estimate quantitatively how much consumption will increase. We will additionally review criteria for a certain level of increased consumption, such as 5% or 10%, and announce the final policy in January.

▲ Most consumption measures are premised on 'quarantine stability.' Are there plans to specify the quarantine stability standards?

=When the number of confirmed COVID-19 cases was at level 1, economic revitalization was promoted through the issuance of consumption coupons, but when it was raised to level 2, the use of consumption coupons was suspended after consultation with quarantine authorities. I want to remind you of this. We will respond appropriately in close consultation with the quarantine authorities. Quarantine is the vaccine. Economic revitalization is possible only when quarantine is stable. We will prioritize quarantine first.

▲ Are you considering a broader target for the third disaster relief fund than initially planned?

=Although the term 'third disaster relief fund' was used, it is being reviewed under the name of support measures for small business damages. During the National Assembly budget review process, an additional 3 trillion won was allocated for COVID-19 damage support. The Ministry of Economy and Finance is currently reviewing various methods, including mobilizing an additional 3 trillion won plus existing budgets and contingency funds, through consultations with related ministries. We are pushing to complete all reviews this month and aim to provide payments in January.

▲ What is the government’s position on the ruling party’s proposed 'Rent Freeze Act'?

=We are aware that the number of COVID-19 cases has surged sharply, causing significant damage to businesses subject to closure and operation restrictions. We are currently reviewing ways to alleviate this burden. This will be included in the upcoming damage support measures, and once finalized, it will be announced at an appropriate time.

▲ The growth forecast seems detached from the third wave of COVID-19. Is there a downside scenario?

=The growth rate was presented after comprehensively considering next year’s economy, the global economy outlook, World Trade Organization (WTO) trade forecasts, and the COVID-19 situation. Although uncertainty remains about how the COVID-19 situation will unfold, recent vaccine developments have increased expectations for an early end to COVID-19. We believe the 3.2% growth forecast is achievable.

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