President Moon Jae-in speaks at an emergency economic council meeting at Cheong Wa Dae on Tuesday. (Yonhap)
President Moon Jae-in on Tuesday announced plans to double the size of an economic rescue package to 100 trillion won ($80 billion) to boost local businesses suffering due to the novel coronavirus outbreak.
The announcement follows a second emergency economic council session this year. Officials handling the nation’s fiscal and monetary policies including Finance Minister Hong Nam-ki, Bank of Korea Gov. Lee Ju-yeol and Financial Services Commission Chairman Eun Sung-soo were present at the meeting chaired by Moon.
While the initial plan drawn up at the council’s inaugural meeting last week focused on bolstering small and medium-sized enterprises and self-employed businesspeople, the new expanded measure would provide a safety net for conglomerates as well.
“It is a preemptive measure to protect our companies and workplaces,” Moon said at the meeting.
“We will take efforts to prevent companies from going bankrupt under the current situation -- normal and competitive firms will not shut down due to temporary liquidity shortage.”
The support for SMEs, other similar businesses and the self-employed through state-backed guarantees and loans will be expanded by 29.1 trillion won to 58.3 trillion won.
To ease the credit crunch and other pain points in the volatile financial market, a total of 41.8 trillion would be injected.
On that note, the bond market stabilization fund has also been doubled to 20 trillion won, twice as much as the corresponding fund launched during the global financial crisis of 2008.
The FSC later added that 10 trillion won would be activated first, while the rest would be dealt with later. Starting with 3 trillion won on Tuesday, the relief will come in the form of a “capital call,” which is basically the act of collecting funds from partners whenever the need arises.
A securities market stabilization fund worth 10.7 trillion won would be newly added to provide a breather for markets that have been jittery over the economic fallout. The stock market has been hit by overseas investors’ massive selling spree fueled by the fears surrounding the fallout.
This is also a 20-fold increase from the corresponding fund established in 2008 and will protect investors by investing in indexes instead of actual stocks, Moon noted.
The Korean bond market has been struggling in recent weeks despite the US Federal Reserve’s decision to slash the base rate by a whopping 1.5 percentage points in two emergency rate cuts, to a target range of zero-0.25 percent.
Though cautious at first, the BOK recently hopped on the global bandwagon of cutting rates, slashing its own rate by 0.5 percentage point to a record low of 0.75 percent last week. It was its first emergency rate cut since the 2008 financial crisis.
By Jung Min-kyung (firstname.lastname@example.org)