by BLOOMBERG / pic by AFP
SOUTH KOREA’S parliament passed a larger-than-planned first extra budget of the year as the government tries to shore up parts of the economy worst hit by the nation’s biggest coronavirus outbreak of the pandemic.
The 16.9 trillion won ($14.2 billion) budget, approved by parliament late Monday, is aimed at compensating losses to businesses that have been laboring under some of the strictest conditions since Covid-19 erupted, as virus cases rose from thousands a day to over a 100,000.
The government had initially proposed a 14 trillion won plan. No additional bonds will be issued other than the initially planned 11.3 trillion won due to considerations for markets and credit ratings, the Finance Ministry said in a statement.
The highly contagious omicron variant of the virus is continuing to sweep across South Korea. While the strain is considered to be less severe than predecessors, it is forcing the government to ratchet up quarantine measures and threatens to weigh on first-quarter economic growth.
The latest extra budget is the seventh since the pandemic began as President Moon Jae-in’s spending measures push up the country’s debt-to-GDP ratio to 50.1% from 36% when he was elected in 2017. Moon will step down in May after a presidential election early next month.
More than 90% of the funds will be used to provide payments to small-scale merchants and micro businesses, while the remainder will go to support medical efforts to deal with the pandemic.
The extra budgets have been pivotal in shoring up growth through the pandemic, helping the economy to expand 4% last year. Private spending has also remained resilient amid multiple waves of the virus, with consumers turning to online shopping as they learn to live alongside Covid-19.
The hit from the virus is falling heavily on businesses with their pain exacerbated by higher borrowing costs as the Bank of Korea hiked its benchmark interest rate to pre-pandemic levels in an effort to rein in inflation.