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(LEAD) S. Korea proposes 11.7 tln-won extra budget to fight virus, shore up economy

Economy 10:39 March 04, 2020

(ATTN: UPDATES with more details, additional remarks in paras 11-15; ADDS photo)
By Byun Duk-kun

SEOUL, March 4 (Yonhap) -- South Korea on Wednesday proposed an extra budget of nearly 12 trillion won to help better deal with the new coronavirus and minimize economic fallout from its outbreak here.

The extra budget bill for 11.7 trillion won (US$9.82 billion), to be submitted to the National Assembly for approval on Thursday, is the country's largest-ever supplementary budget bill to handle the fallout from a contagious disease.

In 2003, the country allocated an additional 4.2 trillion won in the face of the SARS outbreak and then 11.6 trillion won in 2015 to brace for MERS.

The ministry asked the parliament to move quickly, highlighting the importance of speed in taking necessary measures against a looming economic slump. The parliament's ongoing session ends on March 17.

"As stressed every time the government submitted a bill for extra budget, 'timing' and 'speed' are again important and are more urgently needed than ever," the finance ministry said.

If approved by the parliament, the government will use its 1.4 trillion won in leftover funds and issue 10.3 trillion won in fresh bonds to form the extra budget.

A health worker checks his protective glasses before starting his work in Daegu on March 1, 2020. (Yonhap)

The government's supplementary budget proposal also comes after two support packages, worth 20 trillion won in total, that were partly aimed at stopping the spread of COVID-19 and partly at revitalizing the economy.

The extra budget, if approved, will be in addition to the 512.5 trillion won budget earmarked for annual spending this year, the largest amount ever in South Korea.

The South Korean economy expanded 2.0 percent in 2019 from a year earlier, the slowest on-year growth in a decade.

It was earlier estimated to grow 2.3 percent this year, but the Bank of Korea (BOK) slashed its growth outlook to 2.1 percent last week, about one month after the country reported its first confirmed case of COVID-19 on Jan. 20.

More than 2 trillion won from the proposed supplementary budget will be used to boost local consumption, according to the finance ministry.

The government plans to provide gift vouchers to 5 million low-income workers and elders over the next four months, while also offering a 10 percent refund on every purchase of energy-efficient home appliances, including television sets and refrigerators.

It will execute at least 75 percent of the extra budget within two months following its passage, the ministry said.

"The proposed bill is based on a belief that it is important to keep the momentum for economic recovery while providing support to overcome difficulties," Finance Minister Hong Nam-ki told reporters.

"It includes maximum steps to boost domestic consumption," he added.

Finance Minister Hong Nam-ki (2nd from L) speaks in a Cabinet meeting held in Seoul on March 4, 2020, at which the government proposed a 11.7 trillion-won (US$9.82 billion) supplementary budget to fight the outbreak of the new coronavirus and also boost the country's economic growth. (Yonhap)

If approved, the extra budget will be the fourth in the country's history to be formed and executed before the end of first quarter, the ministry said.

The country devised extra budgets in the first quarter of 1998, 1999 and 2009 after the financial crises of 1997 and 2008.

"The country's fiscal deficit will temporarily expand since most of the finances will be procured by issuing national debt, but the government decided it was the inevitable choice to overcome the economic crisis," said the ministry.

The ministry said it would float 10.3 trillion won worth of Treasurys to fund the extra budget, the fourth-largest amount ever.

The extra budget is the fourth under the Moon Jae-in administration.

In 2017, the current administration set aside a further 11 trillion won to create more jobs and then an additional 3.8 trillion won in 2018 for the same purpose.

Last year, the Moon administration also formed a 6.7 trillion won supplementary budget to fight fine dust and help the economy.

bdk@yna.co.kr
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