[Q&A] Hong Nam-ki: "Supplementary Budget Size Over 6.2 Trillion Won... To Be Submitted to the National Assembly Next Week"

After Consultation with Relevant Ministries on Supplementary Budget, Submission to National Assembly Next Week

COVID-19 Impact Continues Until March... 4th and 5th Additional Measures to Be Announced If Necessary

[Image source=Yonhap News]

[Asia Economy Reporter Jang Sehee] Hong Nam-ki, Deputy Prime Minister and Minister of Economy and Finance, stated on the 28th, "The supplementary budget size is being considered at a scale not smaller than the 6.2 trillion won supplementary budget during the 2015 MERS outbreak, based on the expenditure budget." The government plans to swiftly draft the supplementary budget in consultation with relevant ministries and submit it to the National Assembly next week.

Deputy Prime Minister Hong made these remarks during a briefing on comprehensive livelihood and economic measures to minimize the impact of the novel coronavirus infection (COVID-19) and to overcome it early on the 28th. He said, "It is difficult to specify the exact amount as we are currently discovering and reviewing supplementary budget projects," but added, "Considering the more severe situation compared to MERS, the principle is to allocate a larger expenditure budget than that of MERS."

Regarding concerns that the increase in net expenditure from this supplementary budget might worsen national fiscal soundness, he argued, "When implementing a supplementary budget, it is inevitable to utilize available surplus funds to the maximum extent and cover the remainder with deficit bonds." He further stated, "We judged that issuing deficit bonds to prepare measures, even if national debt increases by several trillion won, is necessary rather than doing nothing because of the increase in national debt."

Below is a Q&A with Deputy Prime Minister Hong

▲What is the size of the supplementary budget?

=We are currently discovering and reviewing supplementary budget projects, so I cannot specify the exact amount. The priority is not to set a fixed size but to determine how necessary the projects are. The supplementary budget size during the 2015 MERS outbreak exceeded 11 trillion won, half of which was expenditure and the other half was revenue adjustment. Considering the more severe situation now, the principle is to allocate a larger supplementary budget than the 6.2 trillion won expenditure budget during MERS.

▲Does the current government’s measures and supplementary budget reflect predictions on how long the COVID-19 situation will last?

=The degree to which COVID-19 spreads in the community and when it will transition should be judged by health authorities such as the Ministry of Health and Welfare rather than the economic team. The government expects the situation to continue until around March. After that, it is hoped that containment will be achieved and recovery will begin. If the current measures are insufficient, there will be a 4th and 5th set of measures. Including the supplementary budget, this is the 3rd set of measures. The government needs to carefully formulate measures based on overall assessments of the progress, end timing, and impacts on the Chinese, global, and Korean economies.

▲Do projects like senior job coupons and high-efficiency home appliance purchase rebates align with the COVID-19 response supplementary budget direction?

=Senior job coupons are part of consumption stimulation measures. Similar projects were implemented during the previous MERS outbreak. The high-efficiency home appliance rebate was increased from the initial 30 billion won to 200 billion won. Domestic consumption has significantly slowed, so to revive it after the situation ends, extraordinary measures far beyond last year’s are necessary, which is why more than 200 billion won has been allocated.