Less than 24 Hours After Supplementary Budget Passed... Second Supplementary Budget Officially Announced

Both Democratic and People Power Parties Emphasize Necessity
Full-Scale Discussions Possible After Presidential Election
Experts Express Concerns Over Fiscal Soundness Deterioration

A supplementary budget totaling 16.9 trillion won was passed at the plenary session held at the National Assembly in Yeouido, Seoul, on the afternoon of the 21st. The supplementary budget consists of 13.5 trillion won for support to small business owners and blind spots, 2.8 trillion won for quarantine support, and 600 billion won in contingency funds. 2022.2.21 [Image source=Yonhap News]

[Asia Economy Reporters Hyunju Lee and Juhee Kang] The ruling party officially announced the formulation of a second supplementary budget (추경) just one day after the first supplementary budget bill passed the National Assembly. The opposition party has also effectively signaled a second supplementary budget, increasing the likelihood of another budget debate after next month's presidential election. Experts warn that pushing through another supplementary budget amid depleted fiscal capacity will make it difficult to restore fiscal soundness, and they unanimously agree that systematic support measures, rather than simple cash handouts, are necessary.

Yoon Ho-jung, floor leader of the Democratic Party of Korea, stated at the National Assembly's Supreme Council meeting that morning, "To fully take responsibility for the people's damages, we will swiftly proceed with the second supplementary budget after the presidential election and, if necessary, will also mobilize emergency financial orders." He pointed out that the current supplementary budget is insufficient and pledged additional support after the election. He said, "Any shortfall will be fully compensated immediately upon the election of Democratic Party presidential candidate Lee Jae-myung."

The ruling party's declaration of a second supplementary budget is likely to be joined by the opposition. Kim Ki-hyun, floor leader of the People Power Party, said at a meeting shortly after announcing agreement with the ruling party on the supplementary budget bill the day before, "We agreed temporarily due to urgency," adding, "If People Power Party presidential candidate Yoon Seok-youl is elected president, we will definitely provide support on the scale of 50 trillion won as promised."

Discussions on the second supplementary budget are expected to intensify after the presidential election. The quarantine support fund allocated in the first supplementary budget was 3 million won, whereas the Democratic Party and People Power Party initially proposed 5 million won and 10 million won respectively, so calls for additional support afterward are expected to grow. Furthermore, the ruling and opposition parties agreed in the first supplementary budget agreement to apply loss compensation retroactively (from February 2020 to July 6, 2021) and to add travel, tourism, and event planning industries to the loss compensation targets, necessitating the securing of funds for these measures as well. This agreement is scheduled to be handled during the March extraordinary session of the National Assembly.

However, with the national debt ratio exceeding 50% of GDP, pushing through another supplementary budget raises inevitable concerns about worsening fiscal soundness. If existing budgets are cut to secure funds, backlash is also expected.

Therefore, experts emphasize the need for caution in processing additional supplementary budgets. Kang Sung-jin, professor of economics at Korea University, said, "I do not oppose support, but last year's fiscal deficit increased significantly compared to the year before last," adding, "Support should be provided within capacity; it is problematic to continue support when the treasury is not in good shape." Sung Tae-yoon, professor of economics at Yonsei University, also criticized, "There are doubts about the validity of the first supplementary budget made at the beginning of the year," and said, "Formulating a supplementary budget ahead of political schedules raises suspicions that the purpose is political rather than effective."

Given the prolonged COVID-19 situation, it was suggested that fundamental support measures that can help small business owners and self-employed individuals overcome the COVID era are needed rather than simply handing out cash. Kim Tae-gi, professor of economics at Dankook University, emphasized, "Rather than being tied to loss compensation or disaster relief, support systems should shift to enhancing competitiveness to prepare for the post-COVID era."

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