[Economic Outlook] Possibility of Submitting Additional 7.1 Trillion Won COVID-19 Disaster Relief Budget to the National Assembly This Week

The Bank of Korea Monetary Policy Committee... Focus on Whether Additional Liquidity Will Be Supplied

Vice Minister Yoon Jong-in of the Ministry of the Interior and Safety announces the results of the joint task force (TF) of related ministries regarding the payment of emergency disaster relief funds in response to the COVID-19 outbreak on the morning of the 3rd at the Government Sejong Complex in Sejong City. (Photo by Yonhap News)

[Asia Economy Reporter Moon Chaeseok] The government is accelerating expenditure restructuring to submit a 7.1 trillion won 'one-point supplementary budget (supplementary budget) bill' aimed at providing emergency disaster relief funds to the bottom 70% income group to the National Assembly as early as the second half of the next week.

The government announced its goal to pass the supplementary budget bill in the National Assembly within this month and to distribute the emergency disaster relief funds before mid-May. Due to growing concerns that the support fund measures will worsen fiscal soundness, the government intends to cover the entire amount through expenditure restructuring without issuing deficit bonds.

The Bank of Korea is expected to hold its regular Monetary Policy Committee meeting this week to adjust the base interest rate and consider additional liquidity supply measures. Since the base interest rate was lowered to a historic low last month, attention is focused more on additional liquidity supply measures than on interest rate adjustments.

Financial investment industry insiders expect the Monetary Policy Committee to keep the interest rate at the current level of 0.75% per annum at the regular meeting scheduled for the 9th. This is because it has not been long since the temporary Monetary Policy Committee lowered the rate by 0.50 percentage points to an all-time low.

Dong Jinrak, a researcher at Daishin Securities, said, "Let's observe the effects of the 0.5 percentage point 'big cut' in the base interest rate and the so-called 'Korean-style quantitative easing,' which is the unlimited purchase of repurchase agreements (RP), on the financial market," and predicted, "This time, the interest rate will be held steady."