Gov't spending seeks to limit virus-triggered economic fallout

Finance Minister Hong Nam-ki, second from right, speaks at a press conference at the Government Complex in Gwanghwamun, Seoul, Friday. Yonhap

By Lee Kyung-min

The government will spend 16 trillion won ($13.1 billion) to keep the economy from crashing as fallout from the fast-spreading new coronavirus is expected to take a greater toll than was initially anticipated on the already flagging economy.

The Ministry of Economy and Finance will spend 7 trillion won mostly in the form of tax incentives and support for virus infection victims and affected areas while some 9 trillion won will be injected by state-run financial institutions.

This is in addition to the extra 6.2 trillion won budget set to be drawn up at the National Assembly in March.

“The government decided that measures are needed to counter the difficulty in the economy caused by the virus infection and spread,” the Finance Minister Hong Nam-ki, who doubles as the Deputy Prime Minister, said at a press conference in Seoul, Friday.

“The measure seeks to help victims weather the difficulties, thereby preventing further declines in consumption, exports and investments.”

The government will pay half of the rent cut by landlords that have small and medium-sized enterprises (SMEs) as tenants ― mostly merchants in traditional markets.

Half of the lowered amounts will be recognized as a deductible in the landlords' year-end tax settlements.

Some 900,000 self-employed people whose annual sales are less than 60 million won will be granted a tax incentive of between 200,000 and 800,000 won a year this year and through 2021.

The measure to help manufacturing and retail would mean 800 billion won in lost tax over the next two years.

Some 3 trillion won in financing will be offered to the country's SMEs. Funds to help small merchants will be increased to 1.4 trillion won from 20 billion won, while the borrowing rate will be lowered to 1.5 percent from the current 1.75 percent. The rate cut will be applied across the board regardless of when the money was borrowed.

Emergency funds for medium-sized firms will be increased to 600 billion won from 25 billion won, with each firm able to withdraw up to 1.5 billion won, up from 1 billion won.

A 120 billion won special budget will be allocated to help SMEs in Daegu and North Gyeongsang Province, the hardest hit region where most of the confirmed cases of coronavirus were reported.

Up to 500,000 won will be given to parents that took unpaid leave from work to take care of a child aged under eight, following a shutdown of daycare centers to prevent further spread of the virus.

Each parent will be given 50,000 won per day for up to five days, and single parents will be given the same amount for up to 10 days.

Up to 20 million won in loans will be offered at an annual rate of 1.5 percent to some 17,000 workers whose monthly earnings are less than 50 percent of the country's median income. The money is intended to cover medical costs, tuition or student loans for children.

The government will issue “regional gift vouchers” in the amount of 6 trillion won, double from the current 3 trillion, with the voucher's discount rate increased to 10 percent off the original price from the current five. The vouchers accepted within certain municipalities are issued to spur regional economies by encouraging residents to visit markets there.

The government will temporarily raise the deductible limit on corporate expenditure on “business entertainment,” in a move to induce more corporate spending on facilities and stores run by SMEs.

For those with annual sales of less than 10 billion won and those between 10 billion and 50 billion will have the limit raised by 0.05 percentage points to 0.35 percent and 0.25 percent, respectively.

Those with sales of over 50 billion won will have the limit raised by 0.03 percentage points to 0.06 percent.