Next Year's Budget Maintains 'Expansionary Fiscal Policy'... 20 Trillion Won Invested in Korean New Deal

Moon Administration Continues Expansionary Fiscal Policy... Fiscal Rules to Be Submitted to National Assembly in Early September

[Image source=Yonhap News]

[Asia Economy Reporter Jang Sehee] The government plans to continue its expansionary fiscal policy next year. This is because both exports and domestic demand have turned red as signs of a resurgence of the novel coronavirus infection (COVID-19) have appeared.

According to officials from the Democratic Party of Korea and the government on the 23rd, the ruling party and the government have already reached a consensus that the importance of fiscal policy has increased amid the COVID-19 situation.

Deputy Prime Minister for Economy Hong Nam-ki also stated at the full meeting of the Planning and Finance Committee on the 20th, in response to a question from Democratic Party lawmaker Kim Kyung-hyup about whether to maintain an expansionary fiscal stance, "The budget formulation is not yet finalized, but it seems that the fiscal policy needs to play a role next year," adding, "I think this year's stance should be extended to some extent."

As the economic recession continues due to COVID-19, more than 20 trillion won is expected to be allocated to the "Korean New Deal" project, which will serve as a catalyst for growth. The 20 trillion won budget accounts for about 4% of this year's main budget of 512.3 trillion won. Considering that the budget growth rate for next year is mentioned to be around 8-9%, about half of the increase will be spent on the Korean New Deal.

Regarding this, Deputy Prime Minister Hong said, "To maximize the fiscal catalyst effect of the Korean New Deal, we will expedite the execution of secured fiscal investments and focus on new support," and added, "We will reflect fiscal support needs exceeding 20 trillion won in next year's budget proposal."

As the government continues its expansionary fiscal stance, the need to introduce fiscal rules is also growing. The National Assembly Budget Office stated in its "2019 Fiscal Year Settlement Analysis Report," "It is necessary to establish mid- to long-term fiscal goals to respond to changes in population structure, industrial structure, the unification process, and large-scale fiscal demands in climate, environment, and health sectors," adding, "To achieve this, it is also necessary to discuss specific fiscal measures such as fiscal rules."

Meanwhile, the government is reviewing various alternatives related to fiscal rules and plans to present fiscal rules together when submitting next year's budget proposal in September.

This content was produced with the assistance of AI translation services.