On March 17, the National Assembly passed the 1st 2020 supplementary budget. The supplementary budget includes a decline in revenue by KRW 0.8 trillion, and additional KRW 10.9 trillion spending on disease prevention and treatment, loans and guarantees for business affected, support for households affected, and support for local economies affected.
On April 30, the National Assembly passed the 2nd 2020 supplementary budget. The supplementary budget includes an increase in spending by KRW 8 trillion to fund an emergency relief payment program of KRW 14.3 trillion that provides transfers to households.
On April 22, the government announced additional KRW 10.1 trillion spending on wage subsidies and assistance for the unemployed. The proposal is expected to require approval from the National Assembly.
On May 14, the government announced that it would (1) create 1.56 million more public sector jobs; (2) work on expanding unemployment insurance to platform workers, freelancers and other contractual workers. Both plans are expected to require approval from the National Assembly.
Other announced measures, which either do not require approval from the National Assembly or have not reached supplementary budget proposal stage include:
February 5-19: Tax, customs and financial support for businesses affected by the disease; coastal vessel financing.
February 28: Financial and tax support for families and businesses affected, including 50 percent income tax cuts given to landlords for rent.
March 30: Social security contribution relief. A total of KRW 7.5 trillion payment deferrals and 0.9 trillion contribution cuts are expected. The government will also provide an expected KRW 1.3 trillion in electricity bill payment deferrals.
April 1: Support for tourism-dependent businesses, telecommunications businesses and film industries.
April 8: Measures to frontload public sector investment and purchases; tax support for boosting private sector spending.
April 9, Financial support for childcare due to school and daycare closure will be expanded.
In Summary S. Korea has ...
Real GDP in Q1-2020 declined by -1.2 percent in quarterly terms and year-in-year growth slowed to 1.3 percent, from 2.5 percent in Q4-2019.
On March 23, The Bank of Korea ledged to begin purchasing an unspecified amount of local bonds to help prevent a possible liquidity crunch as well as expand the scope of its purchase program to include bonds issued by public enterprises.
The Bank of Korea slashed its benchmark interest rate to 0.75% in an emergency move following actions by the Federal Reserve.
Korea will lower interest rates applied to its loan facility for smaller companies, and add bonds issued by banks to its open market operations to enhance liquidity
MONETARY AND MACRO-FINANCIAL
The Bank of Korea (BOK) has taken several measures to ensure continued accommodative monetary conditions and facilitate financial system liquidity. These include 1) lowering the Base Rate by 50 basis points , from 1.25 percent to 0.75 percent; 2) making unlimited amounts available through open market operations (OMOs); 3) expanding the list of eligible OMO participants to include select non-bank financial institutions; 4) expanding eligible OMO collateral to include bank bonds, certain bonds from public enterprises and agencies, and government-guaranteed MBS issued by KHFC; 5) easing collateral requirements for net settlements in the BOK payments system; and 6) purchasing Korean Treasury Bonds (KRW 3.0 trillion). To augment available funding for SMEs, the BOK increased the ceiling of the Bank Intermediated Lending Support Facility by a total of KRW 10 trillion (about 0.5% of GDP) and lowered the interest rate to 0.25 percent (from 0.5-0.75 percent).
On March 24, President Moon announced a financial stabilization plan of KRW 100 trillion (5.3 percent of GDP). The main elements are: 1) expanded lending of both state-owned and commercial banks to SMEs, small merchants, mid-sized firms, and large companies (the latter on a case-by-case basis) including emergency lending, partial and full guarantees, and collateralization of loan obligations; 2) a bond market stabilization fund to purchase corporate bonds, commercial paper, and financial bonds; 3) financing by public financial institutions for corporate bond issuance through collateralized bond obligations and direct bond purchases; 4) short-term money market financing through stock finance loans, BOK repo purchases, and refinancing support by public financial institutions; and 5) an equity market stabilization fund financed by financial holding companies, leading financial companies, and other relevant institutions.
On April 22 additional measures were announced totaling KRW 25 trillion (1.3 percent of GDP), mainly through creation of a special purpose vehicle to purchase corporate bonds and commercial paper (KRW 10 trillion) and additional funds for SME lending (KRW 10 trillion). Financing support to exporters and specific industries has also been announced. On April 8, a package of measures totaling KRW 36 trillion (1.9 percent of GDP) was announced to ease financing constraints for exporters, including increasing the amount and maturity of trade credit and expanding trade insurance.
On April 22, President Moon announced a key industry stabilization fund would be established for KRW 40 trillion (2.1 percent of GDP) and operated by Korea Development Bank to support seven key industries: airlines, shipping, shipbuilding, autos, general machinery, electric power, and communications. Funds will be raised by issuance of government-guaranteed bonds and contributions of private funds. Support will be provided through loans, payment guarantees, and investments. As conditions for accessing support, businesses will be required to maintain employment, limit executive compensation, dividends, and other payouts, and share benefits from business normalization in the future.
on May 28 The Monetary Policy Board of the Bank of Korea decided today to lower the Base Rate by 25 basis points, from 0.75% to 0.50%. warns first GDP contraction in 22 yrs
by May 28, The government has already unleashed two coronavirus relief packages. The first supplementary budget, worth 11.7 trillion won, was passed in March at the onset of the pandemic. The second extra budget approved in April was bumped up to 12.2 trillion won from the initial 7.6 trillion won to cover emergency handouts for all households.