S.Korea prepares supplementary budget of $6.6 billion for this year
A currency dealer at a bank in Seoul, South Korea, on Thursday. Reuters
At an emergency economic policy meeting, President Moon Jae-in said the fresh spending of 7.8 trillion won ($6.58 billion) would be used to help small businesses and households.
“The unexpected resurgence of the coronavirus is delaying recovery momentum, and economic activities across domestic demand and consumption are sharply contracting,” Moon told the meeting.
Of the new budget subject to parliamentary approval, 3.2 trillion won will be used as cash payments to small businesses, while another 1.4 trillion won will support struggling job seekers.
Moreover, every South Korean aged 13 years old or older will be able to receive subsidies for mobile phone bills.
The fourth extra budget of this year comes on top of 277 trillion won ($233.66 billion) of stimulus pledged so far to prevent a deeper downturn in Asia’s fourth-largest economy.
South Korea had been more successful than many other countries in containing the virus, managing to avoid a full-blown lockdown, but it suffered a setback in mid-August with a church outbreak, which spread to a political rally.
The strict social distancing rules imposed since late August have hurt restaurants, hospitality and retail sectors, as the government banned onsite dining after 9 p.m. and limited coffee franchises to takeout and delivery.
Small businesses are vanishing fast. Statistics Korea data show the number of self-employed businesses were down by 128,000 in July from a year earlier to 5.55 million, marking the biggest annual drop since 2009.
The Korea Centre for Disease Control and Prevention (KCDC) reported 155 new cases as of midnight Wednesday, which brought the total infections to 21,743, with 346 deaths.
The fresh government containment efforts have led to a steady drop in the daily tally since it reached a peak of 441 last month. But smaller clusters continued to emerge from churches, offices and medical facilities.
The government is set to announce soon whether to extend current curbs, which expire on Sunday, including limiting nightly on-site dining in the Seoul metropolitan area, health ministry officials said on Thursday.
“There are nearly 100 cases occurring daily in the greater Seoul area and we think this trend should be broken,” said Yoon Tae-ho, the ministry’s director-general for public health policy.
Inventory glut at recycled kitchenware stores and booming liquidation businesses point to battered family retailers in every corner of the country.
The government on Thursday announced around $6.6 billion to aid small businesses and, which will provide up to 2 million won ($1,688) of cash payments to struggling entrepreneurs.
The fourth extra budget, subject to parliamentary approval, comes on top of 277 trillion won ($233.66 billion) of stimulus pledged this year, taking public finances further into the red.
While policymakers brag that retail sales returned to growth in June and per-day exports recorded the slowest decline in 7 months in August, small businesses are failing at a rate not seen since the global financial crisis, data from the Korea Statistics shows.
The hardest hit sectors in Asia’s fourth largest economy include hospitality, retail and restaurants, which are traditionally small, family-run businesses.
South Korea has one of the world’s highest proportion of self-employed people, about 25% of the job market, making it very vulnerable to downturns. A 2017 Bank of Korea (BOK) study showed only 38% of the self-employed businesses survive three years.
New retirees seeking to supplement pensions by opening fried chicken diners or coffee shops and unemployed youth starting their own cafes have driven demand for second-hand sales for liquidators like You.
But unprecedented social distancing restrictions imposed on eateries in Seoul since late August, banning onsite dining after 9 p.m. and limiting coffee and bakery franchises to takeout and delivery, has made trading tough for new start-ups.
The government has warned South Koreans for several years not to open more fried chicken shops or cafes as the small hospitality sector is saturated.
Small business profit margins were thinning before COVID-19.
On top of the coronavirus pandemic, that has also fuelled an acceleration of e-commerce, small businesses are fighting spiking rents, a shorter work week and higher minimum wages under the left-leaning President Moon Jae-in.
Reuters
