Corporate Support or Quantitative Easing – What Is the Right Way To Overcome the Crisis?

Countries are devising a series of emergency economic stimulus measures to prevent a recession caused by the spread of COVID-19. While the U.S., Japan and Germany focus on corporate support, Korea focuses on quantitative easing. Major countries are doing this mainly to support business with the hope of overcoming the coronavirus crisis.

The United States is a prime example. President Donald Trump has warned that he will come up with a “very dramatic” economic stimulus plan. Following a first round of tax breaks such as corporate and income tax cuts, the two sides are reportedly discussing a second round, which includes additional corporate tax cuts and salary tax exemptions this time. President Trump said he will overcome the impact of the coronavirus by taking bold tax-cut-oriented measures and go on to become a “strong economy” after that.

Japan is preparing emergency measures which are said to include loans to small and medium-sized companies that were hit by COVID-19 regardless of credit rating, 0% interest funding, and support for large companies to rebuild their supply chains. Germany has also announced a massive support package for companies affected by COVID-19.

On the other hand, Korea introduced comprehensive measures to support wages and the economy, but there have been no corporate tax cuts to enhance economic vitality. Special financial support measures for small and medium-sized businesses and enterprises are being criticized as “pie in the sky.” The supplementary budget bill, or the quantitative easing welfare project, exceeds 3 trillion won (approximately $2.3 billion), raising questions about how effective it is.

At this rate, it is hard to guarantee that we will overcome the coronavirus after all. Despite the need to support smaller companies, even those currently unaffected are likely to collapse. The ups and downs of international business are expected to appear more stark after COVID-19. As the competitive landscape changes due to global supply chain restructuring and the acceleration of digital innovation, there is a strong chance that any company which survives will be the winner. The government will have to come up with the right business support measures now.