The fight to contain the virus spread and economic contagion from COVID-19 has stretched to 270 trillion won, or about 14 percent of this year’s estimated South Korean gross domestic product, with the government packaging a third supplementary budget in yet another record scale of 35.3 trillion won ($29 billion).

The Ministry of Economy and Finance said on Wednesday that it will submit a 35.3 trillion won worth extra budget scheme to the National Assembly on Thursday for approval. The increase to this year’s already supersized spending of 512.5 trillion won is a third after 11.7 trillion won created in March and 12.2 trillion won in April.

The government already said it has used up about half of its original budget for this year and nearly all of two extras by the end of May. Yet the economic conditions are worsening. The Bank of Korea on Monday admitted that the country has entered a technical recession, projecting a fall of more than 2.0 percent in the second-quarter GDP following 1.3 percent contraction in the first quarter.

The third increase is the country’s biggest supplementary size, beating 28.4 trillion won in 2009 in the wake of global financial meltdown and 13.9 trillion won in 1998 following the Asian financial crisis that put Korea on international bailout.

“The latest supplementary budget will serve as a valuable foundation to create a new growth engine in the post-coronavirus era,” said Finance Minister Hong Nam-ki during a Cabinet meeting on Wednesday. “It will also allow the economy to overcome the unprecedented crisis triggered by COVID-19.”

With the latest increase, fiscal spending committed to overcome the virus-driven economic crisis would amount to 270 trillion won, accounting for 14 percent of Korea’s GDP estimated by the government for this year. The government aims to execute more than 75 percent of the extra budget within three months.

The 35.3 trillion won package will be composed of 23.9 trillion won in increased taxes and 11.4 trillion won in tax revenue shortfall.

Of the 35.3 trillion addition firearm, 30 percent or 10.1 trillion won would be financed through saving budget expenditures and 1.4 trillion won through spare funds of eight different funds such as labor welfare promotion fund. The remaining 23.8 trillion won will be raised through debt issues.

The news of more government bond supply weighed over the market. The three-year government bond yield jumped 1.7 basis points to 0.868 percent and 10-year note yield 3.4 basis points to 1.412 percent.

Of the new budget, 5 trillion won will be allocated to support struggling companies, 9.4 trillion won to help expand jobs and social safety net, 3.7 trillion won to boost domestic spending, exports and regional economy, and 2.5 trillion won to enhance the country’s emergency countering system and nurture K-quarantine industry. Also, 5.1 trillion won will be injected to carry out Korean New Deal projects, the government’s bold plan to prepare the country in the post-coronavirus era.

By Lee Eun-joo

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