South Korea’s parliament will today vote on a fourth supplementary budget for the 2020 fiscal year. In addition to an
South Korea’s parliament will today vote on a fourth supplementary budget for the 2020 fiscal year.
In addition to an already approved $233.7 billion of stimulus, on September 17, the left-of-centre Democratic Party (DP) government has submitted a $6.6 billion bill that will primarily target South Korea’s struggling small businesses and the self-employed.
Despite initial praise in its successful handling of COVID-19, an August outbreak led to the return of stringent COVID-19 regulations, with onsite dining banned after 9pm and many other services limited. The restaurant, hospitality and retail sectors have been especially hard hit by renewed social distancing restrictions. As such, a significant portion of the supplementary budget ($2.7 billion) will be devoted to cash payments for struggling small businesses.
Despite the negative implications of approving further stimulus packages to the country’s national debt—as expressed by the main opposition, the People Power Party—expect today’s bill to pass parliament, as the national economy is in a crisis with small businesses collapsing. In the medium-term, despite the importance of robust fiscal policy, the pandemic’s trajectory will determine South Korea’s economic recovery. If the spread of COVID-19 doesn’t slow down, the hefty spending made to assist businesses may cause a record public debt, which will become a growing long-term risk factor.
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