The government and ruling Democratic Party of Korea on Monday agreed to package this year’s third supplementary budget in another record level of over 30 trillion won ($24.4 billion) as the economy is set to see its first contraction this year due to fallout from lengthy virus outbreak.

The third extra budget bill will be submitted to the National Assembly on Thursday.

“We will make sure the third supplementary budget [bill passes the parliament] in June,” said Kim Tae-nyeon, floor leader of the Democratic Party, during a government-ruling party meeting at the National Assembly in Yeouido, central Seoul, on Monday. “A strong signal should be given to the market that the government is all-out to keep jobs and revive economy through aggressive third round of extra budget.”

The ruling party commanding a supermajority of 177 out of 300-member legislative that entered its new four-year term on Monday plans to open an extraordinary session this month to pass related bill.

The upcoming supplementary budget is expected to be set above 30 trillion won, more than doubling the first 11.7 trillion won in March and the second 12.2 trillion won in April.

Finance Minister Hong Nam-ki vowed to execute 75 percent of the extra budget within three months after the new financing plan passes the National Assembly.

The relief financing against the worst global pandemic in modern time has been snowballing. But still the economy is headed towards a technical recession in the second quarter after contracting 1.4 percent in the first quarter. Exports dipped more than 20 percent in April and May.

The Bank of Korea warned of the first negative growth this year since 1998 in the wake of Asian financial crisis.

During the meeting, the government and ruling party agreed to sufficiently inject capital into the market through its third extra budget, come up with special measures to stabilize employment shock, and focus on investment to prepare for post-COVID-19 era such as Korean New Deal. They also agreed to keep expansionary fiscal policy swiftly boost the economy from coronavirus damages.

Under agreed terms, the government will expand credit guarantee funds to supply 10 trillion won in emergency funds to support self-employed businesses and small merchants suffering from liquidity crisis such as due to plunge in sales. The government will also inject 20 trillion won in buying subprime corporate bonds and commercial papers and expanding corporate bond warranty of those suffering from cash shortage. The Korea Trade Insurance Corporation will also increase funds to help export companies ease liquidity shortage.

A total 30 trillion won will also be injected to bond market stabilization fund and stock market stabilization fund with an aim to expand liquidity supply to help corporations.

The government and ruling party also agreed to create 550,000 or more emergency jobs including non-face-to-face and digital ones to minimize shock from employment cliff. They also agreed to expand loans and subsidies for artists, athletes, and patriots and veterans and ease financial difficulty for low credit workers, university students, and young unemployed people.

The government will also issue 2 trillion won in additional onnuri gift certificates that can be used in traditional markets and 3 trillion won in regional gift certificates to help boost domestic economy.

Cho Jung-sik, chief policy maker of the ruling Democratic Party, said that the country will focus on carrying out Digital New Deal and Green New Deal as large-scale projects to shift to a job-creating economy. It also plans to aggressively promote localization of medical equipment and swift development of COVID-19 vaccines and treatments.

By Lee Eun-joo

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