[Yoon Administration Economy] Strengthening Supply Chain Response Capabilities... Supporting Smooth Landing of Household Debt

Busan Port Sinsundae Pier View [Image Source=Yonhap News]

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The Yoon Suk-yeol administration will significantly enhance economic security and crisis management capabilities to prepare for increasing risks such as the Ukraine crisis, supply chain disruptions, and slowing growth in major countries.

On the 16th, the government announced the 'New Government Economic Policy Direction' and stated that it plans to strengthen the role of the economic security response control tower centered on the Ministerial Meeting on External Economic Affairs. The aim is to proactively manage the increasingly complex and multifaceted economic security issues from a long-term perspective.

First, through the enactment and revision of the 'Three Supply Chain Laws'?the Basic Supply Chain Act, the Special Act on Materials, Parts, and Equipment, and the Special Act on Resource Security?the government will establish a supply chain management foundation and continue efforts to stabilize supply chains, including utilizing private sector resources. To build economic security and stable supply chains, multilateral cooperation frameworks such as the Indo-Pacific Economic Framework (IPEF) and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) will also be strengthened.

To secure overseas resources, financing and public institution support for private overseas expansion will be expanded. The special financing support ratio for overseas resource development investments and the reduction rate in case of failure will be adjusted to appropriate levels, and the domestic self-sufficiency base will be expanded focusing on staple foods.

Additionally, the criteria for recognizing returnee companies will be relaxed, and incentives for return will be expanded, focusing on advanced industries and new technologies that have a high possibility of supply chain disruption. Tax reduction requirements will also be eased for companies that complete restructuring of overseas operations and return domestically.

Considering the severe economic situation, the new government plans to proactively manage potential risks in various sectors such as macroeconomics, households, and businesses. Through the 'Emergency Economic Response Task Force (TF)' within the Ministry of Economy and Finance, monitoring of domestic and international macro and financial risks will be strengthened, and timely responses will be made through the Macroeconomic and Financial Meeting and the Economic Ministers' Meeting as needed.

Given soaring inflation, monetary policy will be operated with a greater focus on prices for the time being. The government explained, "The timing of any additional adjustment to the degree of easing will be determined by closely examining growth and inflation trends, accumulated risks of financial imbalances, changes in major countries' monetary policies, and overseas economic conditions including geopolitical risks."

A roadmap for the soft landing of household and self-employed debt will also be prepared. Prior consulting will be provided to enable optimal repayment of deferred principal and interest before the end of the grace period, and guarantees and loans totaling 8.7 trillion won will be supplied to convert high-interest loans in the financial sector to low-interest loans.

For small business owners who are faithfully repaying, 200 billion won of high-interest non-bank loans (interest rates 12?20%) will be converted to revolving fund loans (interest rates 4?7%). Starting in October, a borrower-specific customized debt adjustment program purchasing delinquent (or at-risk) loans will also be operated on a scale of 30 trillion won.

The government will solidify the operation of credit risk assessments, which had been partially relaxed, to ensure smooth market evaluation of corporate risks and restructuring. In response to increased funding demand after the end of maturity extensions and repayment deferrals, a new Corporate Structural Innovation Fund will also be established.

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