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South Korean President Moon Jae-in pledges allegiances to the South Korean flag before a cabinet meeting at the Central Government Complex in Seoul on Mar. 17. (Blue House photo pool)

An emergency economic council launched at the direction of South Korean President Moon Jae-in on Mar. 17 is to formulate and executive policies to respond to the economy’s rapid deterioration amid the novel coronavirus pandemic. It appears poised to serve as the top decision-making organization amid the economic emergency, discussing serious response measures including the development of a second supplementary budget and payment of disaster relief allowances.

The decision to launch the first emergency economic council under the president’s supervision in the 12 years since the global financial crisis of 2008 was made in response to the growing need for swift and effective countermeasures in response to the unprecedented economic shockwaves set off by the coronavirus outbreak.

“The emergency economic council will be examining all issues, with a focus on emergency prescriptions and countermeasures regarding the coronavirus situation,” a senior government official said.

“Because the president will be presiding over it, decisions will be made faster and the driving force will be greater,” the official added.

For now, the matter of developing a second supplementary budget appears poised to come under discussion. While a supplementary budget of 11.7 trillion won (US$9.48 billion) was passed by the National Assembly the same day, many within the ruling party and business community in particular insisted during the review process that the amount should be substantially increased.

Because of the practical difficulties with allocating the budget in a timely manner if the review process was delayed due to major changes to the previously submitted supplementary budget plan, the decision was made to proceed quickly with a National Assembly passage and initiate discussions toward a second supplementary budget.

During a Cabinet meeting on Mar. 17, Moon stressed, “We need to prepare for full-scale implementation of large-scale measures to promote consumption and domestic demand.”

“This supplementary budget is not the end, but the beginning,” he said.

The nationwide expansion of “disaster relief allowances,” which some local governments have independently adopted, also appears likely to be an issue raised for discussion by the emergency economic council. Discussing the current policy priorities, Moon stressed the necessity of efforts to help vulnerable population segments, those who have lost their job or are struggling to make a living, workers faced with the threat of unemployment, and small business operators.

“Whatever name gets assigned to the support funds, there’s a definite commitment to the government playing a clearer and proactive role,” a Blue House senior official said, adding that “the biggest concern is establishing a fair and efficient system for delivering support.”

“Ideas for establishing funding sources are farther down [on the list of importance],” the official added.

Another Blue House senior official said, “The focus is going to be on ensuring that the pain from the disaster is not shared unequally [according to wealth and class].”

It’s been confirmed that the office of the Blue House senior secretary to the president for political affairs is considering the cash support plans recently submitted by the local governments of Seoul, Gyeonggi Province, and South Gyeongsang Province, among others, and listening to expert opinions on the matter.

The first meeting of the emergency economic council is to be presided over by Moon at the Blue House on Mar. 19. The method of operation and membership was announced by Deputy Prime Minister and Minister of Economy and Finance Hong Nam-ki at a coronavirus response meeting involving economy-related ministers on the morning of Mar. 18. The examples of the foreign exchange crisis and global economic crisis in the past suggests that it is to center around Hong and other ministers in economy-related areas along with Blue House economic advisors. Business world representatives and economic experts may also be taking part. The day before the emergency economic council meeting on Mar. 18, a roundtable meeting of economic actors is to be held at the Blue House to discuss measures for overcoming the coronavirus situation and plead for cooperation, with representatives of the business and labor community and party, government, and Blue House officials in attendance.

Meanwhile, in response to ongoing financial market shocks, the Financial Services Commission (FSC) held an emergency financial market review meeting the same morning to begin concrete exploration of a timeline for implementing market stabilization measures, including a bond market stabilization fund.

During the meeting, FSC Chairman Eun Sung-soo requested full-scale preparations to allow the immediate operation of financial market stabilization measures according to the contingency plan. As specific examples of market stabilization measures, the FSC mentioned the bond market stabilization fund, primary collateral bond obligations (P-CBOs), and financial stabilization fund employed during the 2008 financial crisis.

The FSC announced that it plans to “hold market review meetings before markets open every day until the stock market stabilizes.”

By Lee Kyung-mi and Park Hyun, staff reporters

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