The South Korean government’s budget for next year is expected to focus on innovation, inclusive growth and recovery from COVID-19 repercussions. The total budget amount is likely to increase much from the current target amount of 546.8 trillion won. The government held a meeting on March 24 to finalize its budget preparation plan for 2021.
According to the government’s national fiscal management plan for the period of 2019 to 2023, the total expenditures for next year are 546.8 trillion won. The actual budget for next year is likely to exceed the amount and reach an all-time high in that the government is going to adopt an expansionary fiscal policy. This year’s budget is 512.3 trillion won and the annual expenditures increase by more than 9 percent in 2019 and 2020 each according to the government’s budget plan.
Under the circumstances, concerns over fiscal soundness are rising. After the outbreak of COVID-19, the government came up with a supplementary budget and the budget led to a fiscal deficit of 82 trillion won, which is equivalent to 4.1 percent of South Korea’s GDP. The ratio is the highest since the Asian financial crisis of 1998. According to the government’s plan, the total national debt for next year is to be 887.6 trillion won. The supplementary budget, however, added 10.3 trillion won to the debt and the debt for next year is estimated to exceed 900 trillion won.
The meeting covered the tax expenditure plan for this year, too. According to it, the national tax income not reflecting exempted taxes decreases from 293.5 trillion won to 291.2 trillion won this year with the national tax exemption rate predicted to jump to 15.1 percent.