South Korea is looking to mobilize a massive extra budget in a response to a fast-spreading coronavirus outbreak that begins to hobble its economy.

President Moon Jae-in said Monday that an early supplementary budget should be allocated "if necessary" in addition to existing reserve funds to support the government’s dual fight against COVID-19 and its economic impact.

During a meeting with his senior aides at Cheong Wa Dae, Moon called for a "bold injection" of government funds to minimize the damage to businesses, boost domestic consumption and help revive local economies, instructing the secretaries to consider drafting an early supplementary budget, if necessary.

“We should mobilize all national capabilities to prevent the spread of COVID-19,” Moon said.

A few hours later, Hong Nam-ki, deputy prime minister for economy, responded that the government will immediately review a supplementary budget and come up with detailed plans shortly to cushion the impact of the widespread COVID-19 outbreak across the country.

“The number of confirmed (coronavirus) cases has spiked, and the alert level was raised to the (highest) serious level because of the sustained community spread in recent days, which has rationalized the need for aggressive fiscal responses including a supplementary budget,” Hong said in his social media post on Monday.

This is a shift from the finance ministry’s earlier stance on an extra budget. The ministry has so far ruled out the extra budget option.

Experts say the supplementary budget could reach up to 15 trillion won ($12.3 billion), considering the gravity of the problem facing Asia’s fourth largest economy whose already weak growth outlook is overshadowed by the virus outbreak.

This would be also on top of the country’s already super-expansionary budget of 512.5 trillion won plus a reserve fund of 2.8 trillion won allocated for 2020 to boost exports and domestic consumption.

If proposed earlier, lawmakers can fast-track their review and pass the extra budget bill by mid-March or so, experts expect.

The ruling Democratic Party (DP) on Sunday officially requested the government to plan an emergency extra budget and come up with an overall draft by later this week. The DP called for an approval of the bill before the Mar. 17 deadline, citing that the extra budget during the MERS epidemic in 2015 was also passed in 18 days.

If passed, it would make it Korea’s fourth supplementary budget in the first quarter. The country has so far proposed an extra budget in the first half of a year only three times – in 1998 and 1999 in the aftermath of the Asian financial crisis, as well as in 2009 to cope with the global financial crisis.

Institutions at home and abroad have recently downgraded growth estimates for the Korean economy to below 2.0 percent even 1.0 percent citing concerns that the coronavirus outbreak would delay the long-waited recovery in the country’s economy.

By Sohn Il-seon, Lee Ji-yong and Minu Kim

[ⓒ Pulse by Maeil Business Newspaper & mk.co.kr, All rights reserved]