[Weekly Review] Supplementary Budget of 14.9 Trillion Won Passed by National Assembly... IMF Raises South Korea Growth Forecast to 3.6%

On the 25th, the supplementary budget bill worth 15 trillion won for the 4th disaster relief fund payment is being passed in the National Assembly plenary session. Photo by Yoon Dong-joo doso7@

[Sejong=Asia Economy Reporter Son Seon-hee] The first supplementary budget bill of this year for customized damage support measures due to the COVID-19 crisis passed the National Assembly on the 25th. The total scale is 14.9391 trillion won, of which nearly half, 7.3 trillion won, will be used for emergency damage support for small business owners and self-employed individuals. The 4th disaster relief fund ranging from 1 million to 5 million won will be paid by subdividing into seven industries according to the degree of damage.

In addition, a total of 1 trillion won in loans will be supported for 100,000 small business owners in special damage industries who have difficulty obtaining loans due to low credit ratings of grade 7 or below. An interest rate of 1.9% will be applied with a limit of 10 million won.

◆4th Disaster Relief Fund, Expansion of Support Targets and Amounts= During the review process of the supplementary budget bill, the National Assembly increased the budget by 1.4 trillion won and newly established voucher support for farmers and fishermen, which was not included in the government proposal. A voucher worth 1 million won will be provided to 32,000 farming and fishing households that suffered sales decline damage, and 182.3 billion won will be invested in a project that gives vouchers worth 300,000 won to 460,000 small-scale farming and fishing households. Workforce support such as expanding dispatched workers by 1,000 people and an emergency management fund support project of 16 billion won for COVID-19 damaged crops such as flowers and eco-friendly agricultural products were also prepared.

The budget for supporting vulnerable employment groups was increased by 124.3 billion won compared to the government proposal. Income stabilization funds of 700,000 won will be provided to 35,000 charter bus drivers whose income decreased due to reduced tourism demand caused by COVID-19. The required budget is 24.5 billion won. In addition, 48 billion won will be invested to temporarily support infection control fees for medical personnel at infectious disease-dedicated hospitals, and 37 billion won will be invested to provide 80 masks to 1.03 million essential workers.

◆Total Supplementary Budget Maintained... Significant Cuts in Job Projects, etc.= The total supplementary budget passed by the National Assembly was maintained at a level similar to the original government proposal (15 trillion won). This is because reductions equivalent to the increased amount were made. While establishing a new loan project worth 1 trillion won for low-credit small business owners, the existing small business loan project budget of 800 billion won was cut. In the end, the support budget of the same nature was increased by 200 billion won under a different project name.

In job projects, some projects with lower urgency, such as recycling separation, were partially reduced, and family care costs were adjusted to cut the budget by 280 billion won. Also, reflecting recent interest rate changes, the national treasury bond interest repayment budget was cut by 360 billion won. The emergency employment measure was finalized at 2.5 trillion won, 300 billion won less than the government proposal of 2.8 trillion won.

With the total supplementary budget maintained, additional issuance of deficit bonds was avoided. Accordingly, the total national debt remains at 965.9 trillion won as per the government proposal. The national debt ratio compared to Gross Domestic Product (GDP) also remains unchanged at 48.2%.

◆'Supplementary Budget Reflected'... IMF Raises South Korea's Growth Rate to 3.6%= The International Monetary Fund (IMF) raised South Korea's economic growth forecast for this year to 3.6% after two months. This is a 0.5 percentage point increase from the 3.1% forecast presented in the World Economic Outlook (WEO) in January. Since COVID-19 vaccination and export increases drove the economic growth forecast, it suggests that the global economic recovery is occurring faster than expected.

In the Korea Annual Consultation report released on the 25th (local time), the IMF stated, "Real Gross Domestic Product (GDP) growth is projected at 3.6% through gradual normalization of COVID-19 related factors and increased external demand." Along with the expectation that the distribution of COVID-19 vaccines will accelerate economic recovery in major countries worldwide, the IMF gave a positive evaluation of the Korean economy, which has a high export ratio.

In particular, the IMF mentioned that when the report was originally prepared, the GDP growth rate was forecast at 3.4%, but it was revised upward to 3.6% reflecting the recently announced supplementary budget. Inflation this year is expected to record 1.2%.

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