[2022 Budget] Government Draws Line on 3rd Supplementary Budget... COVID-19 and Presidential Election Variables

Ando Geol Deputy Minister of Finance: "No Need to Rely on Supplementary Budget"... Utilizing Funds, etc.
COVID-19 and Interest Rate Hikes Increase Burden on Vulnerable Groups
Supplementary Budget Expected to Maximize Effect Before Next Year's Presidential Election

[Asia Economy Reporter Jang Sehee] Although the government has ruled out the formulation of a third supplementary budget (supplementary budget) within this year, future political events such as COVID-19 and the presidential election are expected to act as variables.

According to the Ministry of Economy and Finance on the 31st, the government is currently not considering the formulation of a third supplementary budget within this year. This is because the recent economic recovery trend is becoming visible, and a sufficient budget has already been reflected proactively. In addition, there is also a judgment that there is physically not enough time to formulate and execute a third supplementary budget. On the 27th, during the '2022 Budget Pre-Briefing,' Deputy Minister of Economy and Finance Ando Geol said regarding the formulation of the third supplementary budget, "The situation has worsened significantly compared to when the second supplementary budget was formulated," and added, "We are trying to resolve it by utilizing various related funds including the existing budget." He also said, "We judge that it is not to the extent of having to resort to a supplementary budget." The government can unilaterally change the fund operation plan within 20% of the budget.

The government reflected 1.8 trillion won in next year's budget for additional expenses for the fourth quarter of this year and the first quarter of next year to compensate for losses of small business owners. During the second supplementary budget this year, a budget of 1 trillion won corresponding to three months (July to September) was reflected.

However, with the prolonged COVID-19 situation and even interest rate hikes, the burden on vulnerable groups has increased further. On the 26th, Lee Ju-yeol, Governor of the Bank of Korea, said, "In the COVID-19 crisis situation, the difficulties of vulnerable groups will be significant due to interest rate hikes," and added, "Efforts to support vulnerable groups intensively are necessary, and this is primarily the responsibility of fiscal policy."

Next year's presidential election also a variable... 'First supplementary budget' before the 21st National Assembly election last year

Political events such as next year's presidential election can also act as variables. A Democratic Party official said, "As the damage from social distancing has accumulated, support for self-employed people is still insufficient," and added, "For execution within this year to be possible, it is considered necessary to do it by the end of September at the earliest, or early October at the latest." Last year, when the COVID-19 situation worsened, the fourth supplementary budget was formulated just ten days after the '2021 Budget' was formulated on September 1.

There is also analysis that the effect of the supplementary budget will be maximized ahead of next year's presidential election. Last year, one month before the 21st National Assembly election in April, the first supplementary budget (11.7 trillion won) was formulated on March 1. About a month later, a supplementary budget of approximately 12.2 trillion won was formulated to provide disaster relief funds to all citizens.

In fact, local governments are rushing to formulate additional supplementary budgets. Seoul City formulated a second supplementary budget of 1.7 trillion won on the 18th, and Gyeonggi Province has also submitted a third supplementary budget plan of 5 trillion won to the provincial council for the purpose of providing disaster relief funds to 100% of residents.

Regarding this, Professor Andonghyun of Seoul National University’s Department of Economics said, "The issue of additional supplementary budgets is expected to resurface ahead of next year's presidential election," and added, "Not only this year but also next year, when a new government is inaugurated, policies need to be redrafted, so rather than adjusting items tied up in the main budget, it will likely proceed in the form of supplementary budgets."

Meanwhile, the necessity of fiscal support is expected to increase further depending on the role-sharing between fiscal and monetary policies. Deputy Minister Ahn said, "Serious disparities are appearing during the economic recovery process," and added, "There are parts that cannot be solved by monetary policy, and only fiscal policy can handle them." He emphasized, "Fiscal and monetary policies are sharing roles well."

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