[2025년 예산안]
High-intensity ‘belt tightening’ for 2 consecutive years
National tax revenue is 382 trillion won less than initially expected… SOC cut by 3.6%, etc., to reduce spending
Next year’s real national deficit is expected to be 77 trillion won
Yoon: “Moon administration increases debt by 400 trillion won, making things difficult”… Opposition: “Despite tax lapse, budget for tax cuts for the rich”
Even though the spending growth rate remained at around 3% next year, following this year, the government forecasted that national debt would exceed 1,200 trillion won for the first time next year. This is because a fiscal deficit of over 70 trillion won is inevitable if the tax slump that began last year continues. Four years later, the government and the opposition party are engaged in a war of words, blaming each other for the fiscal soundness crisis that will result in national debt exceeding 1,500 trillion won.
● National debt to exceed 1,500 trillion by 2028
According to the ‘2024-2028 National Fiscal Management Plan’ announced by the government on the 27th, the managed fiscal balance, which shows the actual state of the country’s finances, is expected to show a deficit of 77.7 trillion won next year. Although the size is smaller than this year’s deficit of 91.6 trillion won, the fiscal deficit is still well over 70 trillion won. The managed fiscal balance is expected to continue to show a deficit of 70 trillion won every year from 2026 until 2028.
Accordingly, the national debt of KRW 1,195.8 trillion this year is also expected to increase to KRW 1,277 trillion next year, followed by an annual increase to KRW 1,353.9 trillion in 2026, KRW 1,432.5 trillion in 2027, and KRW 1,512 trillion in 2028. Comparing 2022 (KRW 1,067.4 trillion) when this government was launched and 2027, the national debt will increase by KRW 365.1 trillion in five years.
The fact that fiscal soundness is worsening despite the government’s austerity policy is interpreted as a result of the continued increase in welfare spending amid the rapid aging of the population while tax revenues are woefully insufficient.
Last year, the government projected next year’s national tax revenue at 401.1 trillion won. However, on this day, the government projected next year’s national tax revenue to be 382.4 trillion won, nearly 20 trillion won less than the original forecast. Due to the deterioration of corporate performance, a tax deficit of more than 20 trillion won is expected this year, following last year’s 56 trillion won deficit, indicating that the tax drought will continue next year.
There are also some inside and outside the government who point out that even this national tax revenue outlook may be too optimistic. Considering this year’s tax revenue is far below the initial estimate and the sluggish domestic economy, next year’s national tax revenue may also fall short of the budget.
The government cut the social overhead capital (SOC) budget by 3.6% in next year’s budget and embarked on a 24 trillion won spending restructuring, but it is still difficult to avoid financing the country with debt. A government official said, “Although the growth rate of discretionary spending excluding mandatory spending is only at 0.8% due to the rapid increase in welfare spending stipulated by law, the overall spending is increasing by 3.2%.”
● “Last government’s debt was 400 trillion won” vs “This government’s debt is also expected to be 360 trillion won”
The government and the opposition party are engaged in a war of words over the growing fiscal soundness crisis. President Yoon Seok-yeol emphasized at the Cabinet meeting that day, “We must tighten our belts, boldly reduce inefficiencies, and properly spend money where it is absolutely necessary,” and pointed out that the previous government increased the national debt by more than 400 trillion won over five years. This is a head-on refutation of the criticism made by Park Chan-dae, the floor leader of the Democratic Party of Korea, on the 26th, saying, “The debt owed by the government and households exceeded 3,000 trillion won at the end of the second quarter of this year,” and that “this is the result of continuing tax cuts for the ultra-rich despite the economic slowdown and tax slump.”
The opposition party responded that the current government’s ‘tax cuts for the rich’ are worsening fiscal soundness. On this day, the Democratic Party of Korea criticized, “This is a budget that reflects the Yoon Seok-yeol government’s tax cuts for the rich, neglect of the people’s livelihood, and abandonment of the future,” and “The tax base has been damaged by tax cuts for the rich, and the budget for livelihood projects has not been reflected or investment has been reduced.” The argument is that the government is making tax collection conditions more difficult by pushing for measures such as lowering the inheritance tax rate.
Sejong = Reporter Kim Do-hyung [email protected]
Reporter Yoon Da-bin [email protected]
Reporter Hwang Hyeong-jun [email protected]
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2024-08-28 01:14:26