Korea aims to sharply lower fiscal deficit for next year

August 22, 2022


Korea is mapping out next year's national budget in a way that would lower the fiscal deficit to 3 percent of its gross domestic product (GDP) or less for the first time in four years, sources said Monday.

The move is aimed at improving fiscal soundness that has been compromised by years of expansionary fiscal spending under the preceding liberal government as the Yoon Suk-yeol government plans to implement a belt-tightening fiscal policy.

If the details are finalized as planned, the fiscal deficit-to-GDP ratio would drop below 3 percent for the first time since 2019, when the corresponding ratio reached 1.9 percent based on the national budget plan.

The country's deficit-to-GDP ratio is expected to reach 5.1 percent this year.

In the first half, the country logged a fiscal deficit of 101.9 trillion won, larger than a shortfall of 79.7 trillion won a year earlier.

The finance ministry is also working on a stricter fiscal rule in an effort to enhance the health of public finances.

Under the proposal, if the debt-to-GDP ratio at any point exceeds 60 percent, the government is required to lower the fiscal deficit to 2 percent or less. The debt-to-GDP ratio is likely to hit 49.7 percent this year.

Korea's national debt grew more than 400 trillion won ($299 billion), or some 62 percent, over the past five years, according to the ministry. The sovereign debt is expected to reach 1,070 trillion won this year.

The government aims to sharply reduce next year's national budget below this year's total expenditures of 679.5 trillion won.

If the ministry strictly controls the fiscal deficit for next year, the 2023 national budget may reach around 640 trillion won, up some 5 percent from this year's national budget of 607.7 trillion won. (Yonhap)


Selected articles from The Korea Times