(Bloomberg) -- South Korea's parliament approved a 558 trillion won ($507 billion) budget for next year that aims to help turn around the economy from the pandemic slump and increase support for the vulnerable.
The budget, approved late Wednesday, is 2.2 trillion won larger than the government's proposal in September, an increase that shows lawmakers agree on the urgency to offer additional support for the economy. More funds have been earmarked for emergency handouts to businesses affected by the virus crisis and also for vaccine preparation. Allocations for non-urgent projects have been reduced.
Exports have helped South Korea exit a recession in better shape than most major economies, but the recovery has been unbalanced with domestic-focused service industries still suffering. The central bank last week said the economy will likely shrink 1.1% this year before rebounding to 3% growth next year, but it forecast employment gains to remain only around half the pace seen in the years before Covid-19.
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The 2021 budget would take South Korea's debt burden even higher to 47.3% from the 43.9% expected after four extra budgets this year, and is likely to bring more government debt issuance. The Bank of Korea has been purchasing debt on an ad hoc basis to keep yields low.
Governor Lee Ju-yeol said last week that the central bank will keep monitoring yield trends, but stopped short of offering a concrete purchase plan for the year ahead.
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