President Moon Jae-in on Wednesday chairs an emergency economy council at Cheong Wa Dae. (Yonhap)
South Korea has unveiled an additional economic relief package worth 53.7 trillion won ($44 billion) in its continued struggle to boost the domestic market and export industries amid the fallout of COVID-19.
Of the newly added amount, 36 trillion won will be allocated to trade finance, expanding the insurance and guarantee caps, while 17.7 trillion won will be used to stimulate local consumption.
“The global economy is sinking into a severe recession and our export-dependent economy is consequently facing tsunami-like shockwaves,” said President Moon Jae-in on Wednesday while chairing the fourth emergency economic council session at Cheong Wa Dae.
Citing the plausible risks of an employment crisis and liquidity crunch along the way, the state chief vowed “drastic fiscal injections” by mobilizing all available resources.
Asia’s fourth-largest economy had earlier carried out 100 trillion won in emergency financial actions to support ailing businesses and made an unprecedented decision to pay out disaster relief funds to the people.
“These, of course, are not enough and the government is progressively working on follow-up measures, bracing for future crises,” Moon said.
“The good thing is that if we are able to steady COVID-19 a step ahead of most other countries, it also means that we may have an upper hand in taking economic stimulus actions.”
Announcing the additional measures, the president addressed the country’s exporters, which have suffered a direct hit from the collapse of the global value chain and a dampened market in general.
By providing 36 trillion in trade finance, the government will extend the maturity of trade insurance and guarantees within a ceiling of 30 trillion won in order to sustain the credit ratings of marginal companies. Also, emergency liquidity worth 5 trillion won will be injected to help local companies expand overseas business amid worldwide pump-priming trend.
“Crisis can turn into opportunity,” Moon said, citing the country’s unparalleled quarantine system that has risen to the global spotlight.
As for the domestic market, the government came up with an extensive plan to encourage prepayments to help out marginal business operators.
“The government will make all efforts to execute the 17.7 trillion won to shore up the domestic economy,” said Deputy Prime Minister and Finance Minister Hong Nam-ki, in a briefing following the presidential meeting.
The plan pivots on maximizing advanced payments to inject liquidity to stalled industries.
“Prepaid purchases will be of great help to small businesses and owner-operators as they provide much-needed liquidity at a time of crisis,” Hong said.
Encouraging such practices, the government vowed to make advanced payments for the public investment projects slated for the second half of the year and to alleviate the processes for state contracts. The former is expected to create an economic effect worth 2.1 trillion won and the latter some 3.3 trillion won or more, according to the fiscal chief.
“In an all-out effort to prevent a consumption cliff, (the government) will maximize the purchases and payments for necessary commodities and assets.”
Also, in a separate action from the export-boosting plan and the domestic market stimulus plan, the Ministry of SMEs and Startups reported a 2.2 trillion-won budget to finance newly starting businesses.
By Choi He-suk, Bae Hyun-jung