Korea Plans Handouts to Families to Cushion Virus Shock

(Bloomberg) -- Just two weeks after South Korea adopted one extra budget, President Moon Jae-in said another is already being planned to help insulate households against the impact of the coronavirus pandemic.

The budget would provide payments to families below the top 30 percentile of income, with some four-person households getting about 1 million won ($815), Moon said Monday at an emergency economic meeting. The government will seek parliament’s approval shortly after general elections on April 15, Moon said.

The central government’s latest aid package is likely to total 7.1 trillion won, Finance Minister Hong Nam-ki said in a separate statement. Local governments are expected to add another 2 trillion won in support, the Finance Ministry said in an email.

The plan is the latest in a series of efforts to keep liquidity flowing across a South Korean economy that is sputtering under the strain of the outbreak. While the rise in cases has slowed in South Korea, the country depends on trade and the pandemic is hammering most of its export markets.

The government chose to focus its aid within the bottom 70% of the income distribution in order to reserve some fiscal capacity to respond to potential credit crunches or surges in unemployment that could come with an “economic shock with no end in sight,” Moon said.

Parliament already approved a 11.7 trillion won ($9.5 billion) extra budget on March 17, embracing a call from the government for swift action to cushion the impact of the virus. The budget included 10.9 trillion won in spending and another 800 billion won to address a tax-revenue shortfall.

The government has separately announced around 100 trillion won in support for businesses and financial markets. The Bank of Korea provided aid by slashing its key interest rate to a record low, while promising unlimited liquidity via repurchase agreements for three months.

©2020 Bloomberg L.P.