This Year's 4.2% Economic Growth Target... Supplementary Budget of 33 Trillion Won Formulated

KRW 15~16 Trillion COVID-19 3-Packaged Measures Including
Card Spending Cashback and Consumption Coupon Issuance to Boost Consumption Across the Board

Deputy Prime Minister for Economy Hong Nam-ki is delivering opening remarks at the '2021 2nd Supplementary Budget Party-Government Consultation' held at the National Assembly Members' Office Building on the 29th. Photo by Yoon Dong-joo doso7@

[Asia Economy Reporters Kim Hyun-jung (Sejong), Jang Se-hee] The government announced large-scale consumption stimulation measures including a card spending cashback program and issuance of consumption coupons to achieve 4.2% economic growth this year. Including these consumption support measures, a supplementary budget (supplementary budget) totaling KRW 33 trillion has been prepared to accelerate economic recovery in the second half of the year.

On the morning of the 29th, the Democratic Party and the Ministry of Economy and Finance announced a second supplementary budget plan worth about KRW 33 trillion after consultation. It includes a KRW 15~16 trillion COVID-19 3-packaged project to support small business owners and private consumption, and about KRW 12 trillion worth of regional economic reinforcement measures. The ruling party and government plan to further discuss the specific supplementary budget projects and reflect them in the government’s recently announced second half economic policy direction (Ha-gyeong-jeong).

Earlier in the Ha-gyeong-jeong announcement, the government confirmed a KRW 1 trillion “Win-Win Consumption Support Fund,” which will refund 10% of the monthly increase exceeding 3% compared to the average monthly card usage in the second quarter of this year on a monthly basis. However, spending at department stores, large marts, online shopping malls, luxury specialty stores, entertainment establishments, and vehicle purchases are excluded. The program will initially be implemented for three months, with extension to be reviewed later. Specific criteria such as luxury goods prices excluded from cashback have not yet been determined.

To increase consumption again in culture, arts, performances, sports, and dining sectors, related consumption coupons and vouchers will also be additionally issued. Existing consumption coupons will allow new issuance or use of dining, sports, movie, exhibition, performance, and sports viewing coupons when the first dose COVID-19 vaccination rate reaches 50%, and lodging, tourism, railroad, and bus coupons when it reaches 70%. The government expects these milestones to be reached in August (50%) and September (70%).

The three major consumption packages promoted since the beginning of the year ? 10% additional income deduction on increased credit card usage, 30% reduction in individual consumption tax on passenger cars, and rebates for purchasing high-efficiency home appliances ? will continue in the second half of the year.

For small business owners, customized damage countermeasures and expanded low-interest loans at around 1% will be provided to stabilize management. The previously announced KRW 500,000 re-challenge support fund will continue until the end of the year, and the “Good Landlord” support target will be expanded to include closed small business owners.

The government presented that it aims to achieve economic growth of about 4.2% this year through these private consumption stimulation measures, expanded investment incentives in three major sectors of semiconductors, batteries, and vaccines, and discovery of new projects in the KRW 110 trillion investment project. This figure is 1 percentage point higher than the forecast (3.2%) announced at the end of last year and also exceeds the forecasts of the Bank of Korea (4.0%) and Korea Development Institute (3.8%). The growth rate for next year is projected at 3.0%.

Experts expect that achieving the 4.2% forecast is possible with the government’s fiscal projects but also evaluate that more active private sector recovery measures are needed. Professor Kim So-young of Seoul National University’s Department of Economics said, “Since the government has already injected a lot of fiscal spending, achieving 4.2% growth is fully possible,” but added, “As economic recovery is already underway, additional stimulus measures are unnecessary. The more the government spends, the less the private sector will spend.” Professor Sung Tae-yoon of Yonsei University’s Department of Economics said, “Considering the decrease in disposable income, the private sector’s recovery is expected to be limited,” and “The significant increase in growth rate is ultimately due to expansionary fiscal policy and base effects.”

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