[Reporter’s Notebook] Plenty to Spend, but the National Treasury Is Empty

In short, it is a case of "adding insult to injury." Amid growing forecasts that this year's economic situation will not be easy, the repercussions from the emergency martial law and impeachment crisis in December last year have begun to take full effect, and various recent economic indicators are actually showing a downward trend. The Korea Development Institute (KDI), a government-funded research institute, revised its economic growth forecast on the 11th, lowering it by 0.4 percentage points from the previous estimate to 1.6% for this year. It also issued bleak assessments such as "both domestic demand and exports are expected to show only low growth rates, leading to a slowdown in growth" and "as economic growth deteriorates, the increase in employment will also slow."

To make matters worse, the national treasury has suffered a huge deficit. Following 2023, last year also saw a shortfall of a staggering 30.7816 trillion won in tax revenue. This was largely due to corporate tax revenue falling 19.5% below expectations, amounting to only 62.5113 trillion won. This is because Samsung Electronics and SK Hynix posted losses due to the semiconductor market downturn in 2023 and thus did not pay corporate taxes. The Ministry of Economy and Finance explained, "It was expected that the semiconductor market would recover after the first half of the year."

However, the semiconductor downturn that hit at the time was more severe than expected, and the government’s forecast missed the mark. The problem is that errors in corporate tax revenue, which depends heavily on semiconductor companies?representative cyclical industries?may continue going forward. Although the government has pledged to improve forecast accuracy, even semiconductor company executives admit that "the cycle is changing increasingly rapidly, making it difficult to predict even the next quarter," highlighting the growing volatility in the semiconductor industry.

The cycle period, which used to fluctuate every 3 to 4 years, has shortened, making predictions even more difficult. Moreover, the memory semiconductor industry, which is South Korea’s mainstay, is particularly sensitive to economic changes. When global uncertainties are high, as they are now, the number of variables increases, making it difficult to raise the accuracy of tax revenue forecasts beyond a certain level. This means that the overall budget may continue to fluctuate due to corporate tax revenue rising and falling in line with the unpredictable semiconductor cycle.

Ultimately, to strengthen the national treasury, it is necessary to build a solid economic fundamental rather than relying solely on specific companies and industries. Instead of focusing efforts on improving predictability by looking at a limited pie, a fundamental solution to increase the pie is needed. It is essential to promote regulatory innovation and investment activation so that each economic agent can actively participate, and to establish a stable foundation where the results generated through these efforts accumulate in the treasury. In this process, efforts to diversify the domestic industrial structure must also be intensified. Since fierce competition among major countries over future growth engines such as artificial intelligence (AI) and robotics has already begun, it is time to accelerate the development of new domestic industries.