First Quarter Fiscal Deficit Hits 61.3 Trillion Won, Second Largest on Record

The national fiscal deficit for the first quarter was recorded at 61.3 trillion won, marking the second largest deficit on record. Although corporate tax and income tax revenues showed improvement compared to last year, the scale of government expenditures remained similarly high to the previous year.

According to the "May Fiscal Trends" report released by the Ministry of Economy and Finance on May 15, the managed fiscal balance?which represents the government's net fiscal status excluding social security funds such as the National Pension?recorded a deficit of 61.3 trillion won in the first quarter. This figure is derived by subtracting total expenditures (210 trillion won) from total revenues (159.9 trillion won), and then deducting the social security fund balance (11.3 trillion won).

The deficit is the second largest ever recorded. The managed fiscal deficit reached an all-time high of 75.3 trillion won in the first quarter of last year. While this represents an improvement of 14 trillion won compared to a year ago, the deficit remains large when compared to 2023 (-54 trillion won), 2022 (-45.5 trillion won), and 2021 (-48.6 trillion won).

Total revenues improved compared to the previous year. National tax revenues increased by 8.4 trillion won year-on-year to 93.3 trillion won. Corporate tax revenue rose by 6.5 trillion won due to improved business performance last year and increases in corporate interest and dividend income. Income tax revenue also increased by 2.8 trillion won as more bonuses were paid and the number of employees grew. However, value-added tax revenue decreased by 1.5 trillion won due to increased refunds and a base effect from last year's tax support measures. Non-tax revenues, which are part of total revenues, amounted to 11.3 trillion won, up 3.9 trillion won from the previous year, while fund revenues increased by 200 billion won year-on-year to 55.3 trillion won.

On the other hand, total expenditures only decreased by 200 billion won, from 212.2 trillion won in March of last year to 210 trillion won this year. Although total revenues improved, the scale of total expenditures remained at a similar level to the previous year, resulting in the managed fiscal balance still recording a deficit. Hwang Heejung, Director of Fiscal Soundness at the Ministry of Economy and Finance, explained, "The managed fiscal deficit is mainly due to high total expenditures," and added, "There was an increase in basic pension payments and National Pension benefit payments." As of March, the execution rate of total expenditures?which represents the actual expenditure as a percentage of the original budget?stood at 31.2%.

Central government debt stood at 1,175.9 trillion won, down 4.6 trillion won from the previous month. Compared to the end of last year, the balance of Treasury bonds and foreign exchange stabilization bonds increased by 32.9 trillion won and 2.9 trillion won, respectively.

Last month, the volume of Treasury bonds issued was 20.9 trillion won. The cumulative annual issuance of Treasury bonds up to April was 81.2 trillion won, accounting for 41.1% of the total issuance limit. Treasury bond yields fell compared to the previous month due to increased preference for safe assets amid external uncertainties such as U.S. reciprocal tariffs, as well as expectations of lower market interest rates. The average funding rate last month was 2.56%, down from 2.65% in the previous month. Net foreign investment in Treasury bonds recorded a net inflow of 9.6 trillion won.