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Government’s Budget Deficit Hits All-time High of 11.4 Tril. Won
National Debt Comes Close to 700 Tril. Won
Government’s Budget Deficit Hits All-time High of 11.4 Tril. Won
  • By Jung Suk-yee
  • December 11, 2019, 15:05
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Korea’s consolidated fiscal balance posted a record deficit of 11.11 trillion won in the January-October period of this year.

Korea’s consolidated fiscal balance (the government’s gross expenditures minus the government’s gross income) posted a record deficit of 11.11 trillion won in the January-October period of this year.

The deficit on the operational fiscal balance, which shows the government's net fiscal situation, reached a high of 46 trillion won during the same period. The central government’s tax income stood at 260.4 trillion won, a drop of 3 trillion won from the previous year. The national debt came close to 700 trillion won as the central government’s spending snowballed despite a drop in national tax income.

The Korean government's total income reached 406.2 trillion won and its total expenditures 417.6 trillion won in the first 10 months of the year, said the December 2019 issue of the Monthly Finance Trends published by the Ministry of Strategy and Finance on Dec. 10. The consolidated fiscal balance dropped by 11.4 trillion won, while the operational fiscal balance recorded a deficit of 45.5 trillion won. It was the first time since 2000 that the consolidated fiscal balance contracted by 11.4 trillion won.

In particular, the consolidated fiscal balance has been renewing record deficits since March. During the same period, the operational fiscal balance (the consolidated fiscal balance minus the four social welfare funds) suffered a deficit of 45.5 trillion won. On a cumulative basis until October, this is the highest deficit since the related data began to be disclosed in 2011. By October, however, the cumulative national tax income stood at 260 trillion won, down 3 trillion won from a year ago. As a result, the central government debts hit 698.6 trillion won, an increase of 4.2 trillion won from the previous month. In fact, the central government is close to hitting 700 trillion won in debts.

Nevertheless, the central government expected the cumulative fiscal balance to improve by the end of December.

"Since accounting work is not yet finished, we cannot predict the sizes of administrative fiscal balance and the administrative fiscal balance," said an official at the Ministry of Strategy and Finance. “We think that the amounts will be close to what the central government expects. The central government estimated this year’s consolidated central government balance and administrative fiscal balance at a surplus of one trillion won and a deficit of 42.3 trillion won, respectively.

By October, progress in tax collection reached 88.3 percent, down 1.4 percentage points from 89.7 percent in the previous year. This is a drop of 0.2 percentage points from the average progress rate of 88.5 percent in the last five years (2014-2018). The rate of revenue progress is a measure of the rate of revenue actually collected against the government's target revenue for one year. A low percentage of the progress means that the speed of revenue slowed down.

In the meantime, the government's fiscal budget implementation arrived at 263.2 trillion won by the end of October, 1.2 trillion won (0.6 percentage point) more compared to the same period of last year.