Even though the Korean government spent nearly 60 trillion won to support and reimburse losses incurred by COVID-19, the balance of loans taken out by business owners grew by more than 300 trillion won compared to pre-COVID-19.
According to the Ministry of SMEs and Startups (MSS), Covid-19-related assistance and reimbursement between September 2020 and June this year amount to a total of 60.3 trillion won. The payment categories include 16 trillion won for the relief package, 14.2 trillion won for disinfection assistance, 22.6 trillion for loss reimbursement, and 7.5 trillion won for loss compensation. Apart from the MSS’s spending, the Ministry of Employment and Labor spent 1.2 trillion won on emergency employment relief for small business owners and self-employed workers.
Despite the massive scale of support paid by the government, the debt on SMEs and business owners’ shoulders increased by 45 percent over two and a half years. According to the Bank of Korea, the balance of loans taken out by business owners stands at 994 trillion won as of late June, which is 309 trillion won higher than that as of the end of 2019 (685 trillion won). The third quarter’s balance is projected to be over 1,000 trillion won. The burden is becoming heavier due to a series of interest rate hikes. The central bank explained that assuming there are 3.068 million people, with a 0.5 percentage point increase in interest rate leads to 1.17 million won more interest per person. 1.0 and 1.5 percentage points increase means an increase of 2.34 million won and 3.51 million won, respectively.
Dong-Jin Shin email@example.com