South Korea’s government and ruling party have agreed to allocate more than 20 trillion won ($16.85 billion) of the 2021 state budget to financing the “Korean New Deal” stimulus package, party officials said Wednesday.

They also vowed to keep up the current expansionary fiscal policy tone throughout next year, bracing for a prolonged economic downturn.

The decision came during a meeting held at the National Assembly between the government and the ruling Democratic Party of Korea to draw up the state budget bill for next year.

“It has become impossible to predict when the COVID-19 pandemic will come to an end and the global economy may recover,” said Rep. Kim Tae-nyeon, floor leader of the ruling Democratic Party of Korea.

“As the global supply chain faces an unprecedented crisis, the key to economic recovery is finance.”

While requesting the government to expand the quarantine-related budget, the party official also stressed that economic programs such as the New Deal, balanced growth, and youth subsidies should be amplified.

“It is the young generation that has taken the heaviest blow from COVID-19,” Rep. Kim said, calling for enhanced job training programs and residential subsidies for young people.

Deputy Prime Minister and Finance Minister Hong Nam-ki vowed all efforts for expansionary fiscal operations in order to jumpstart the coronavirus-hit economy.

“The government will review and adjust its post-COVID-19 measures in step with the latest quarantine situations,” the top policymaker said.

He also said that finance will play a key role, suggesting that the government will prolong the current expansionary fiscal policy tone throughout next year.

“(Next year’s state budget plan) will seek to create and safeguard 2 million jobs, and support private consumption and public investment,” Hong said.

The finance minister especially placed focus on the Korean New Deal, the Moon Jae-in administration’s midterm economic stimulus package to kick-start the stalled economy and to empower new growth engines.

The program, announced earlier this year, aims to inject 160 trillion won into the economy and create 1.9 million jobs by 2025, while laying the groundwork for long-term economic growth.

“We will for sure inject 20 trillion won or more as the (Korean) New Deal budget (next year),” he said.

Another 20 trillion won will be spent on supporting young job seekers, under a program titled “Youth Hope Package Assistance.”

The 2021 budget bill is slated to be submitted to the National Assembly for approval next Thursday, officials said.

“We currently have the necessary policy space as the country’s fiscal soundness is better off than that of the United States, Japan, Germany and other key economies,” said Rep. Cho Jeong-sik, the party’s chief policymaker.

By Bae Hyun-jung (tellme@heraldcorp.com)