South Korea passes extra budget with handouts for most households

Seoul

SOUTH Korea passed its second-largest extra budget of the pandemic, seeking to shore up the economy as the country's worst virus wave so far shows little sign of abating.

The 34.9 trillion won (S$41.2 billion) spending plan approved by lawmakers early on Saturday is slightly larger than the original proposal submitted by the government.

The budget includes a 250,000 won cash handout that covers most people in the country and will prove a timely bulwark against the economic damage from a semi-lockdown affecting half the population.

South Korea's economy was smooth sailing until infections started to surge in early July, making the government's 4.2 per cent growth outlook for the year look increasingly uncertain. Policymakers are pinning hopes that with the fiscal stimulus, and as vaccinations gather pace, the recovery will remain on track.

The latest extra budget is the sixth of its kind since the pandemic hit Korea last year, and comes as the central bank prepares to raise its record-low benchmark rate before year-end. Bank of Korea governor Lee Ju-yeol has said he expects the added fiscal stimulus to support vulnerable sectors of the economy as the central bank shifts its focus to curbing financial risks.

About 11 trillion won will be used for handouts to lower-earning households, while 12.6 trillion won will be funnelled to support regional economies and 5.3 trillion won will go towards compensating small businesses that suffered from pandemic restrictions.

The government will set aside 4.9 trillion won for vaccination purchases and to boost the country's quarantine measures, and will use 2.5 trillion won to support jobs, including vocational training.

Further, South Korea will expand social distancing measures outside the capital Seoul from Monday and ban gatherings of more than five people.

The country reported 1,487 new Covid-19 cases on Sunday, the Korea Disease Control and Prevention Agency said. "The proportion of confirmed cases in the non-capital areas has reached over 35 per cent," South Korea's President Moon Jae-in told a virus response meeting on Sunday. "It is clear that the virus is spreading across the country."

Seoul is already subject to strict curbs. BLOOMBERG