[Full Text] Hong Nam-gi "This Year's Growth Rate Target 0.1%... Will Achieve Strong Economic Recovery"

[Image source=Yonhap News]

[Asia Economy Reporter Jang Sehee] Deputy Prime Minister and Minister of Economy and Finance Hong Nam-ki emphasized on the 1st, "We intend to present a growth target of 0.1%, reflecting the effects of the supplementary budget (추경) and other policies, as well as the government's strong policy will."

At the joint briefing of related ministries on the economic policy direction for the second half of 2020 held at the Government Complex Seoul on the same day, Deputy Prime Minister Hong stated, "We pledge to achieve a fast and strong economic recovery that serves as a global model by swiftly implementing policy tasks and making results visible."

The following is the full text of Deputy Prime Minister Hong's announcement.

Dear citizens,

Today, the economic team stands here to explain the economic policy direction for the second half of 2020, which was established to overcome the national crisis caused by COVID-19 and to build a leading economic foundation for the post-COVID era.

First, we have had to fight a battle amid the dual crisis of health and economy caused by the COVID-19 pandemic.

Fortunately, supported by the successful K-quarantine, and thanks to the united efforts of all citizens,

we have endured difficulties without a complete lockdown like major advanced countries.

The government has also been fully committed to rapid support for damage recovery, stabilizing livelihoods, and protecting jobs in response to the critical valley caused by the infectious disease shock,

and has prepared and implemented extraordinary measures amounting to 250 trillion won so far.

As a result of the combined efforts of the public and private sectors,

our economy is currently evaluated to have relatively minimized damage compared to other major advanced countries.

However, as the saying "everything is determined by COVID" implies, uncertainties surrounding our economy remain high.

Domestically, sporadic cluster infections and transmission cases continue,

delaying the return to normal economic activities,

and due to the ongoing global spread of COVID-19,

it may take considerable time for overseas demand recovery in tourism and exports.

Consequently, there is a significant divergence in forecasts for our economy this year among major institutions,

with many institutions projecting negative growth for the first time since the foreign exchange crisis.

For example, last month, at a similar time,

the Bank of Korea forecasted a -0.2% contraction,

while the Korea Development Institute (KDI) cautiously projected +0.2% growth.

The government, considering recent domestic and international conditions comprehensively,

does not exclude the possibility of negative growth this year, but

in this second half economic policy direction,

we intend to present a growth target of +0.1%, reflecting the effects of the supplementary budget and the government's strong policy will.

The second quarter of this year may be more difficult than the first quarter due to the global economic recession and sharp decline in exports,

but if COVID-19 subsides domestically in the first half and globally in the second half,

we believe that from the third quarter onward, growth turning positive can be realized with the help of policy effects.

Next year, as the IMF forecast also indicates, a rebound of over 3% is expected.

The government will spare no effort to focus on economic quarantine to achieve these goals.

Not only will we strive to endure the immediate crisis,

but also to "stand up" through full economic recovery,

and to "jump-up" by pioneering the post-COVID era, addressing urgent tasks promptly and systematically with preemptive responses.

This is the reason and background for preparing and implementing the second half economic policy direction one month earlier than usual in early July,

and for preparing three supplementary budgets in one year for the first time in half a century.

Dear citizens,

Our economic team pledges to swiftly implement the policy tasks announced here this year and make the results visible,

achieving a fast and strong economic recovery that serves as a global model,

and now we will begin explaining the "second half economic policy direction."

The economic policy direction for the second half of this year is prepared under two main goals:

"Early overcoming of the national crisis + building a leading economic foundation."

First, to overcome the national crisis caused by COVID-19 and restore our economy to its normal path.

To this end, we will further strengthen support for self-employed, small business owners, and companies in crisis or at the limit,

and maximize support for fast and strong economic recovery through revitalizing consumption, investment, and exports,

while focusing on managing financial and trade risk factors that may arise during the crisis.

The other goal is

"Building a leading economic foundation for pioneering the post-COVID era."

Since structural changes across all sectors are accelerating due to COVID-19,

we consider preparing for the post-COVID era as an urgent task to be promoted from the second half.

To this end,

we included tasks to vigorously promote key projects such as the Korean New Deal and quarantine and bio sectors,

boldly innovate industrial and economic structures,

and expand the inclusive state foundation that protects the lives of all citizens.

Now, I will explain the specific contents of these policy directions.

First, we will further strengthen the support to overcome the economic crisis early.

Above all, until the crisis is surely overcome, we plan to operate available macroeconomic policy tools such as fiscal, financial, and foreign exchange policies as actively as possible.

In particular, we will actively perform the role of fiscal support as the last bastion, including submitting the largest-ever third supplementary budget bill to the National Assembly this week.

To further strengthen support for self-employed, small business owners, and companies in the second half,

we will supplement the existing 175 trillion won financial package.

We will expand supply of 1 trillion won in low-income financial products such as Saetcheon Loan and 6.9 trillion won in regional credit guarantee,

and from the end of this month, we will fully operate a 2 trillion won debt restructuring program to support those who closed their businesses due to COVID-19.

Also, we will actively support the smartization and online transition of self-employed and small business owners by newly establishing a 200 billion won smart small business exclusive guarantee.

Support for companies in crisis or at the limit is also a measure to protect jobs and livelihoods.

We will promptly implement a financial stability package including a 40 trillion won industrial stabilization fund and a 20 trillion won corporate bond and CP purchase institution.

Moreover, the third supplementary budget bill to be submitted to the National Assembly includes a 10 trillion won special employment stability measure.

We will thoroughly prepare so that 550,000+ direct jobs can be executed smoothly on the ground immediately after the bill passes.

Second, we will achieve a "fast and strong economic recovery that serves as a global model beyond quarantine in the economic sector."

In the current situation where exports and investments are constrained due to worsening external conditions, domestic demand recovery is most important.

First, to support the regeneration of consumption power deferred by COVID-19,

we will provide consumption coupons in eight major sectors including accommodation, tourism, culture, dining out, and agricultural and marine products.

For example, in accommodation, up to 40,000 won discount coupons will be provided to 1 million people when booking online.

To this end, we will support about 200 billion won (168.4 billion won) in budget to induce about 1 trillion won in consumption.

The "three-piece set" policy for consumption recovery support, which has been proven effective and well received by the public, has been further expanded.

First, for the high-efficiency home appliance rebate that refunds 10% of the purchase amount,

we will add dryers to the rebate targets, supporting a total of 11 items, and triple the support scale from 150 billion won to 450 billion won.

We will issue an additional 50 trillion won in local love gift certificates and Onnuri gift certificates, totaling 140 trillion won this year (from 90 trillion to 140 trillion won).

Regarding the individual consumption tax on passenger cars,

we will reduce it by up to 30%, the maximum level achievable by revising enforcement ordinances without legal amendments in the second half of this year, to lower the purchase burden.

Despite difficult conditions, we will also focus on revitalizing investment.

To strengthen incentives for companies to expand investment, we will drastically reform the facility investment tax credit system.

We will integrate and simplify the existing nine facility investment tax credit systems,

and provide additional credits* on top of the basic credit for increases compared to the average of the previous three years.

Especially, to actively induce investment expansion in the second half of this year,

companies will be able to choose the more favorable system between the existing and reformed systems for this year's investments.

We will also accelerate the promotion of private, private investment, and public 100 trillion won investment projects.

We will promptly implement newly discovered 6.2 trillion won projects centered on logistics facilities, and accelerate execution by expanding private investment first in private projects.

Exports were very difficult last month, dropping more than 20% compared to the same period last year.

Urgent breakthroughs are needed to overcome the severe export situation.

We will establish a one-stop support system to assist non-face-to-face marketing for small and medium enterprises and actively resolve difficulties through support for overseas local logistics costs.

Also, export financing will be supplied at 118 trillion won in the second half, about 5 trillion won more than last year, and overseas infrastructure order support measures will be prepared in June.

Furthermore, to enable export companies to respond immediately to export demand concentrated in the second half,

we will devise temporary supplementary measures for the special extension of overtime work permit limits (currently 90 days per year), and soon prepare and announce separate export revitalization measures.

Third, it is also important to manage risks so that they do not become prominent during crises. We will leave no gaps in managing domestic and external risks.

We will prioritize stable management of trade issues amid the US-China dispute,

strengthen efforts to ease volatility in foreign exchange and financial markets, including measures to improve foreign exchange soundness of financial companies.

To maintain the national credit rating, we will make multifaceted outreach efforts targeting the three major credit rating agencies and pay special attention to managing external credibility.

Next are tasks for building a leading economic foundation for the post-COVID era.

First, the rapid promotion of three major key measures that will form the foundation for building a leading economic foundation.

The first is the promotion of the "Korean New Deal."

Today, I will talk about the overall framework, structure, and direction of the "Korean New Deal,"

and individual projects included in the supplementary budget bill will be announced immediately after the Cabinet meeting confirms the bill on June 3,

and the comprehensive "Korean New Deal Promotion Plan" will be announced in early July.

The Korean New Deal aims to transform our economy from a follower to a leader, opening new opportunities through large-scale job creation.

It is not only a short-term measure for crisis recovery and job creation,

but also a medium-term future preparation for the post-COVID era.

The Korean New Deal is structured on the foundation of people-first values and a solid employment safety net,

with two New Deal axes: the Digital New Deal and the Green New Deal.

We plan to invest a total of 76 trillion won in 25 core projects across seven sectors by 2025,

and in the first phase (second half of 2020 to 2022), we will invest 31.3 trillion won focusing on immediately promotable tasks to create 550,000 jobs by 2022.

First, the Digital New Deal.

In response to the economic and social structural transformation accelerated by COVID-19, such as non-face-to-face and digital economy,

we will invest 13.4 trillion won by 2022 in 12 projects across four major areas: strengthening the D.N.A ecosystem, building digital inclusion and safety nets, fostering non-face-to-face industries, and digitalizing SOC, creating 330,000 jobs.

This will be key to promoting digital economic transition and enhancing competitiveness of new and existing industries.

Next, the Green New Deal.

The Green New Deal focuses on three major areas and eight projects: green transition of urban, spatial, and living infrastructure; building a green industry innovation ecosystem; and spreading low-carbon, distributed energy.

We will invest 12.9 trillion won by 2022 to create 133,000 jobs.

Through this, we will support a broad green transition across the economy and society to simultaneously overcome economic and climate crises and lead the transition to a low-carbon economy.

Finally, a solid employment safety net foundation.

The Digital New Deal and Green New Deal cannot succeed without a solid and dense employment safety net to address future labor market structural changes.

Therefore, we will invest 5 trillion won by 2022 in five projects: building a nationwide employment safety net, providing livelihood and employment stability support for blind spots, reforming to a future-adaptive vocational training system, innovating industrial safety and work environment, and supporting new entry and transition in the labor market, creating 92,000 jobs.

Considering the urgency of promoting the Korean New Deal,

about 5 trillion won for New Deal projects to be promoted immediately from the second half is included in this third supplementary budget bill.

The second of the three key measures is "Future power of BIG3 such as quarantine and bio."

To lead the global quarantine market triggered by the COVID-19 crisis, we will concentrate R&D support up to clinical phase 3 for early development of therapeutics and vaccines,

systematize our K-quarantine model and promote international standardization, actively fostering the infectious disease response industry.

For the bio and green sectors, whose importance has been further highlighted by COVID-19,

we will establish a "Comprehensive Plan for the Medical Device Industry" in the second half,

actively utilize the 'Smart Korea Fund' worth 1 trillion won, and sequentially prepare nurturing plans for related industries such as regenerative medicine.

Also, for system semiconductors, we will build a design support center providing one-stop services throughout the entire cycle from fabless startup to growth, nurturing it as a comprehensive hub for companies and investors.

The third key measure is "GVC hub formation including U-turn and advanced industry attraction."

Above all, we will devise various support measures such as priority allocation within the total factory volume in the metropolitan area so that U-turn companies can start businesses where they want.

Also, the minimum production reduction requirement for corporate and income tax reductions, which was only granted if overseas production was reduced by more than 50%, will be boldly abolished, and benefits will be granted proportionally to the amount of overseas production reduction.

Subsidies for advanced industries will be 15 billion won even if they return to the metropolitan area, and doubled to 20 billion won in non-metropolitan areas.

To promote R&D center U-turns, we will add R&D expenses and R&D personnel criteria to the existing production volume-based U-turn company recognition standards.

We will supplement and specify these U-turn measures and prepare and promote a "GVC Innovation Strategy including U-turn and advanced industry attraction strategy" at the government-wide level in July.

Next, we will accelerate innovation efforts to create a leading industrial and economic structure.

First, to spread the second venture boom, we will drastically ease regulations on venture holding companies,

and consider allowing general holding companies to hold corporate venture capital in a limited way.

To advance key industries and service industries,

we will actively support smart factories and manufacturing smartization,

and seek solutions to service industry regulations through models like Han-geureum.

Also, as a measure for single-person households presented in the annual economic policy direction,

we will actively pursue tailored measures for single-person household living bases such as youth asset formation, housing support, 24-hour care expansion, and safety for women living alone.

Furthermore, we plan to announce a comprehensive "post-COVID preparation plan" this month, covering responses to industrial and economic structural changes caused by COVID-19,

and prepare and announce a "non-face-to-face industry promotion plan" by August to proactively and comprehensively respond to non-face-to-face trends.

Finally, we will not neglect efforts to expand the inclusive state foundation so that no one is left behind in the process of responding to economic and social structural changes.

We will gradually expand the scope of employment insurance coverage so that all workers can receive benefits,

and prepare the National Employment Support System scheduled to be implemented next year without delay.

We have also strengthened demand-tailored job support for youth, middle-aged, elderly, and women.

Especially, targeting people in their 40s, who are the backbone of our economy and face significant job difficulties,

we will greatly expand job support by newly establishing the Rebound 40+ job package linking training, experience, and employment, and group counseling programs.

We will also extend the relaxation of emergency welfare support requirements for low-income groups until the end of this year,

and establish the second comprehensive basic living security plan in August to fill the gaps in inclusion more tightly.

Dear citizens,

We are facing an unprecedented crisis caused by the COVID-19 infectious disease.

However, we want to remember that our economy has overcome numerous crises wisely and grown step by step each time.

This time as well, we will surely achieve a fast and strong economic recovery,

and build an economic foundation to lead the post-COVID era.

The government and economic team will do their best and spare no effort.

The first step is the third supplementary budget bill to be submitted to the National Assembly this Thursday.

Citizens and companies engaged in economic activities on the ground eagerly await the swift passage of the third supplementary budget bill to feel its effects.

The government will make thorough preparations to ensure that more than 75% of the budget can be executed within three months immediately after the bill passes, as well as prepare for the National Assembly's review.

We take this opportunity to request the newly convened 21st National Assembly to promptly review and approve the supplementary budget bill.