South Korea unveils $13.7b stimulus package as virus saps growth

Money will go to health system and other hard-hit sectors to cushion economic fallout

South Korean soldiers in protective gear spraying disinfectant in Seoul yesterday to help prevent the spread of the coronavirus. South Korea has the most cases of infections outside mainland China, weakening consumption and prompting the Bank of Kore
South Korean soldiers in protective gear spraying disinfectant in Seoul yesterday to help prevent the spread of the coronavirus. South Korea has the most cases of infections outside mainland China, weakening consumption and prompting the Bank of Korea to issue a warning about possible economic contraction in the first quarter.PHOTO:AGENCE FRANCE-PRESSE
South Korean soldiers in protective gear spraying disinfectant in Seoul yesterday to help prevent the spread of the coronavirus. South Korea has the most cases of infections outside mainland China, weakening consumption and prompting the Bank of Kore
Finance Minister Hong Nam-Ki.

SEOUL • South Korea announced a stimulus package of 11.7 trillion won (S$13.7 billion) yesterday to cushion the impact on the country of the largest coronavirus outbreak outside China, as efforts to contain the disease worsen supply disruptions and sap consumption.

Finance Minister Hong Nam-ki said the supplementary budget, subject to parliamentary approval, will channel money to the health system, childcare and outdoor markets.

"As we understand that the economy is in a state of emergency, we are putting all our policy focus on minimising the economic fallout, especially for the vulnerable sectors, small to medium-sized businesses and self-employed people," Mr Hong told a news conference.

The flu-like virus, which originated in China, has killed more than 3,000 people worldwide and roiled financial markets as investors and policymakers brace themselves for a sharp knock to global growth.

South Korea has the most cases of infections outside mainland China, weakening consumption and prompting Bank of Korea governor Lee Ju-yeol to issue a warning last week that Asia's fourth-largest economy could contract in the first quarter.

About a dozen brokerages - from BofA Securities to Capital Economics to Goldman Sachs - expect South Korea to grow at a slower pace than last year's paltry 2 per cent, which was its worst growth since the global financial crisis.

Of the 11.7 trillion won proposed, 3.2 trillion won will make up for the revenue deficit while 8.5 trillion won will be an extra fiscal injection. An additional 10.3 trillion won in treasury bonds will be issued this year to fund the extra budget. The extra budget is slightly larger than the 11.6 trillion won package introduced during the 2015 Middle East respiratory syndrome outbreak.

The government aims to present a finalised supplementary budget to the National Assembly today.

Some 2.3 trillion won will be allocated to medical institutions and fund quarantine efforts, with another 3 trillion won going to small to medium-sized businesses struggling to pay staff wages, and childcare subsidies, the Finance Ministry said.

Loans will be made on relaxed terms to affected exporters while people who have lost their jobs will be retrained.

BOOSTER JABS

We are putting all our policy focus on minimising the economic fallout, especially for the vulnerable sectors, small to medium-sized businesses and self-employed people.

FINANCE MINISTER HONG NAM-KI

Government debt will rise to 41.2 per cent of gross domestic product (GDP), or 815.5 trillion won, after the supplementary budget, compared with 39.8 per cent of GDP projected earlier.

REUTERS

A version of this article appeared in the print edition of The Straits Times on March 05, 2020, with the headline 'S. Korea unveils $13.7b stimulus package as virus saps growth'. Subscribe