The Democratic Party of Korea and Government Discuss Total Budget Expenditure Growth Rate at 7-8% Level
[Asia Economy Reporter Jang Sehee] The government is reportedly considering next year's budget to be in the 550 trillion won range, increasing by 7-8% compared to this year's main budget. The focus of next year's budget will be on economic recovery through the Korean New Deal.
However, there is a sensed atmosphere to moderate the pace in managing side effects caused by the recent rapid fiscal expansion.
According to the government and the Democratic Party of Korea on the 9th, the Ministry of Economy and Finance plans to report a draft of next year's budget, including these details, to President Moon Jae-in within this week. This report is a procedure to coordinate the big picture and direction of next year's budget in advance before finalizing the budget.
A government official stated, "The core is to promote the Korean New Deal project to recover the economy stagnated by the COVID-19 crisis and to take the Korean economy to the next level."
Regarding expectations from some quarters that the total budget expenditure growth rate could exceed double digits (10% or more), the government has clarified that this is not true.
◆ Democratic Party of Korea and Government Discuss Total Budget Expenditure Growth Rate at 7-8% Level = The Democratic Party of Korea is also not considering increasing the rate to the 10% range. While continuing an expansionary fiscal stance, the total budget expenditure growth rate for next year is being discussed at the 7-8% level to minimize side effects such as the accumulation of national debt caused by rapid fiscal spending expansion.
It is known that if the spending scale on projects currently undecided increases, the growth rate could rise to the 8% range. If the budget growth rate for next year is seen at 7-8%, the total budget amount will be around 550 trillion won.
This year, the main budget was 512.3 trillion won, but with three supplementary budgets due to COVID-19, the total expenditure increased to 546.9 trillion won.
When the government announced the third supplementary budget in June, the deficit ratio of the managed fiscal balance to GDP was 5.8%, and the national debt ratio to GDP was 43.5%, both record highs.
◆ Government’s Keyword for Next Year’s Budget: Korean New Deal... "Paradigm Shift for the Korean Economy" = The government is expected to concentrate budget investment on the Korean New Deal. This is because the Korean New Deal is anticipated to be a core policy that will lead not only economic recovery but also a paradigm shift in the Korean economy.
The government has set a goal to invest 160 trillion won in the Korean New Deal, including the Digital New Deal, Green New Deal, and strengthening safety nets, by 2025. To this end, it plans to invest a total of 67.7 trillion won, including 49 trillion won in national funds, by 2022.
Although some related budgets were included in this year's third supplementary budget, 2021 is effectively the first year to kick off the Korean New Deal, so a considerable budget is expected to be allocated.
The government is currently working on specifying detailed projects based on the big picture of the Korean New Deal already announced, such as the Data Dam, Intelligent (AI) Government, and Green Remodeling.
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