Opposition's Livelihood Recovery Support Fund... Even Reference Study Researchers Say "Negative"

"Current High Interest Rates and Inflation Differ from COVID-19 Period"
Democratic Research Institute: "Time to Support Private Growth through Subsidies"

On the 13th, the Democratic Research Institute, the think tank of the Democratic Party of Korea, published a report titled "Proposals for Livelihood Policy Tasks in the 22nd National Assembly: Livelihood Recovery Support Fund to Increase Growth Rate," which expressed expectations for the effects of the Livelihood Recovery Support Fund pledged by Lee Jae-myung, the leader of the Democratic Party of Korea. The report forecasted a consumption stimulation effect based on various data related to disaster relief funds. However, the researchers who prepared the reference materials expressed negative opinions about the Livelihood Recovery Support Fund.

Lee Jae-myung, leader of the Democratic Party of Korea, is attending the Supreme Council meeting held at the National Assembly on the 8th. Photo by Hyunmin Kim kimhyun81@

The Democratic Research Institute report, referencing data and papers from several researchers, claimed that about 30-70% of the support amount would stimulate private consumption and contribute to South Korea's low real Gross Domestic Product (GDP) growth rate. Chae Eun-dong, a research fellow at the Democratic Research Institute who authored the report, stated, "The national debt only requires interest repayment, and if the interest repayment on government bonds is below 2% of the national budget, there is room to increase debt further."

However, the researchers who created the materials referenced in the report expressed negative views on the Livelihood Recovery Support Fund. Kim Mi-ru, a research fellow at the Korea Development Institute (KDI) who authored "The Effects and Implications of the First Emergency Disaster Relief Fund," told Asia Economy in an interview, "Unlike during the COVID-19 outbreak period, the current situation involves high interest rates and high inflation," adding, "The Livelihood Recovery Support Fund could inadvertently affect prices and undermine policy consistency." She further stated, "Policies like disaster relief funds had effects such as boosting sales but were temporary," and "I believe support focused on vulnerable groups is needed now rather than stimulating domestic demand."

Another reference, "The Impact of COVID-19 and the First Emergency Disaster Relief Fund on Household Income and Expenditure," authored by Hong Min-gi, a senior research fellow at the Korea Labor Institute, took a fundamental stance but pointed out the small sample size of studies on cash support for the entire population, such as the Livelihood Recovery Support Fund. Hong explained, "There are almost no samples for policies like the Livelihood Recovery Support Fund and disaster relief funds." He also said, "It is certain that inflation is high now," adding, "Those who believe the cause of high inflation lies in supply factors such as the Ukraine war will say the Livelihood Recovery Support Fund helps, while those who see demand factors like disaster relief funds will say fiscal policy has no effect."

The Democratic Research Institute countered that since the inflation rate is slowing down, the Livelihood Recovery Support Fund would not significantly impact prices. Research fellow Chae said, "(Fiscal policy) cannot avoid stimulating prices," but explained, "Organizations like the Organisation for Economic Co-operation and Development (OECD) report that inflationary pressures in South Korea are easing." He added, "There is a gap between South Korea's economic scale and its long-term growth trend," and said, "It is necessary for the government to help private growth through measures such as the Livelihood Recovery Support Fund."