Gov’t proposes W604tr ‘super budget’ for 2022

Sep 01, 2021, 08:49 am

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President Moon Jae-in speaks during a Cabinet meeting held at Cheong Wa Dae on August 31, 2021./ Source: Yonhap News

AsiaToday reporter Lee Ji-hoon

The South Korean government has proposed a record high budget of more than 600 trillion won for next year as it plans to maintain its expansionary fiscal policy next year. As a result, the country’s national debt is expected to surpass the 1,000 trillion-won mark for the first time next year, and the debt-to-GDP ration will likely to hit over 50 percent.

The government confirmed the 2022 budget plan on Tuesday at a Cabinet meeting presided over by President Moon Jae-in at the presidential office.

The government has proposed a 604.4 trillion won (US$519 billion) for next year, up 8.3 percent from this year’s budget of 558 trillion won. The government’s super budget proposal indicates that it will continue to maintain its expansionary fiscal policy in order to address the fourth wave of the pandemic and new polarization as well as to achieve zero carbon emissions.

“There is still a long way to go toward full recovery. In order to respond to great transformation, such as global supply chain reorganization and changes in the international trade order, the fiscal role is more important than ever,” President Moon Jae-in said.

As the government will inject more money next year, the average increase in total spending over the past five years of the Moon Jae-in administration stood at 8.6 percent, exceeding the average annual growth rate of 5.2 percent in the National Fiscal Plan for 2018-2022 by 3.4 percentage points. The Moon administration recorded a high rate of increase in total annual spending of the main budget, with 7.1 percent in 2018, 9.5 percent in 2019, 9.1 percent in 2020, and 8.9 percent in 2021.

The problem is that the country’s national debt will surpass 1,000 trillion won (us$862 billion) next year with continuous expansionary financing, raising concerns about the country’s fiscal soundness. The national debt will reach 1,068.3 trillion won next year, or 50.2 percent of the GDP, according to the government. It is the first time in history that the national debt exceeds 1,000 trillion won and the debt-to-GDP ratio exceeds 50 percent.

However, the country’s fiscal deficit is forecast to decline next year due to higher tax revenue, according to the government. The fiscal balance is expected to post a deficit of 55.6 trillion won in 2022, smaller than an expected shortfall of 90.3 trillion won for this year.

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