[2021 Budget] Next Year's 555.8 Trillion Super Budget... National Debt to Reach 1070 Trillion in 2022

Spending Up 8.5% Compared to This Year... Sharp Increase for 3 Consecutive Years
Revenue Decreases Next Year While Spending Rises... Concerns Over Worsening Fiscal Balance
National Debt Expected to Reach 1,070.3 Trillion Won in 2022

[Sejong=Asia Economy Reporter Kim Hyunjung] Next year's national budget has been formulated as a 'super (超) super budget' of 555.8 trillion won, an 8.5% increase from this year. The government plans to accelerate expansionary fiscal policy to revitalize the economy, which has been stagnant due to the COVID-19 pandemic, and to promote the 'Korean New Deal,' a leading development strategy. However, due to worsening domestic and international economic conditions, tax revenues are likely to decline, causing national debt to rise to 945 trillion won next year and soar to the 1,000 trillion won level by 2022.

On the 1st, the government held a Cabinet meeting and finalized the 2021 budget totaling 555.8 trillion won. Expenditures increased by 43.5 trillion won (8.5%) from this year (512.3 trillion won), showing a high growth rate for three consecutive years following 2019 (9.5%) and 2020 (9.1%).

The government first allocated 199.9 trillion won for health, welfare, and employment budgets to recover from the COVID-19 crisis, an increase of 19.4 trillion won (10.7%) from this year. This accounts for 35.9% of the total national budget. Among this, the job creation budget alone expanded by 5.1 trillion won (20.0%) to reach 30.6 trillion won. To promote innovative growth through the national development strategies of the Digital and Green New Deals, the budgets for industry, small and medium enterprises, and energy were also increased by 5.4 trillion won (22.9%) to 29.1 trillion won. Research and development (R&D) and environmental budgets were raised by 3 trillion won (12.3%) and 1.5 trillion won (16.7%), respectively, to 27.2 trillion won and 10.5 trillion won.

The social overhead capital (SOC) budget was allocated 26 trillion won, an 11.9% (2.8 trillion won) increase, marking a double-digit growth for two consecutive years following this year. The defense budget rose by 2.7 trillion won (5.5%) to 52.9 trillion won, while the education budget was the only one to be reduced by 1.6 trillion won (-2.2%) to 71 trillion won compared to this year.

Next year's total revenue is expected to increase by 1.2 trillion won (0.3%) to 483 trillion won, reflecting mixed effects of sluggish corporate tax revenues due to the COVID-19 pandemic and expanded social security contributions. Ultimately, the budget will run a deficit as total expenditures (555.8 trillion won) exceed total revenues, marking the third consecutive year of deficit following 2019 and 2020. The gap between expenditure and revenue growth rates this year is -8.2 percentage points, worsening from -3.0 percentage points in 2019 and -7.9 percentage points in 2020, reaching a record high.

To cover the shortfall in tax revenues, the government plans to issue 89.7 trillion won in deficit bonds. This is a sharp increase of 165% compared to 33.8 trillion won in 2019, with 60.3 trillion won issued in the current year's original budget.

The combined fiscal deficit, including government funds, will reach 109.7 trillion won, a sharp increase of 38.2 trillion won from this year's original budget, and national debt will rise by 139.8 trillion won to a total of 945 trillion won. The fiscal deficit ratio to GDP will worsen by 1.9 percentage points to -5.4%, and the national debt ratio will deteriorate by 6.9 percentage points to 46.7%. According to the '2020-2024 Medium-Term Fiscal Management Plan,' national debt is projected to surge to 1,070.3 trillion won in 2022, 1,196.3 trillion won in 2023, and 1,327 trillion won in 2024. The national debt ratio is expected to climb to 50.9%, 54.6%, and 58.3% during the same period. However, these estimates are based on the government's assumption of a nominal growth rate of 4.8% in 2021 and 4% from 2022 to 2024; if growth rates decline, these indicators could worsen further.

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