[2020 National Audit] Yoon Hee-sook "Ministry of Economy and Finance's Long-term Fiscal Outlook is Nonsense... Deceiving the Public with Unrealistic Discretionary Spending"

[Asia Economy Reporter Kim Hye-min] The Ministry of Economy and Finance has been accused of deliberately deceiving the public by setting baseless targets in its long-term fiscal outlook.

Despite receiving criticism from the Board of Audit and Inspection, it has been pointed out that the Ministry unrealistically lowered the discretionary spending indicator in the long-term fiscal outlook, causing the national debt ratio forecast to be excessively underestimated.

On the 7th, Yoon Hee-sook, a member of the National Assembly's Planning and Finance Committee from the People Power Party, announced that after analyzing data submitted by the Ministry of Economy and Finance, the Ministry drastically reduced the ratio of discretionary spending to gross domestic product (GDP) from 13% in 2020 to 5.8% in 2060 in its long-term fiscal outlook.

They fixed total expenditure to increase at the level of the nominal growth rate and then subtracted mandatory spending, thereby unrealistically lowering discretionary spending. The Ministry projected the national debt ratio to be between 64% and 81% in 2060 in the "2020-2060 Long-term Fiscal Outlook."

Yoon criticized that this method of unrealistically lowering discretionary spending to underestimate the national debt ratio was repeated despite the Board of Audit and Inspection's criticism in June. At that time, the Board pointed out that the 2015 long-term fiscal outlook set the discretionary spending growth rate equal to or lower than the nominal growth rate, which did not reflect reality. Yoon stated, "Nevertheless, this time, the discretionary spending growth rate was assumed to be even lower than the nominal GDP growth rate."

While the Ministry of Economy and Finance presented the ratio of discretionary spending to GDP as 5.8% in 2060 in the long-term fiscal outlook, the National Assembly Budget Office predicted it to be 12.4%. In 2015, the Ministry had forecasted it at 10.9%.

Yoon predicted that if the discretionary spending growth rate were made realistic, the national debt ratio in 2060 would be between 204.4% and 215.2%. This exceeds four times the average of non-key currency countries in the Organisation for Economic Co-operation and Development (OECD).

Yoon criticized, "The long-term fiscal outlook is meant to accurately assess long-term fiscal risks and proactively respond to them to enhance the sustainability of national finances, but the Ministry ignored the Board of Audit and Inspection's criticism and deceived the public. This is an irresponsible plan where the current government spends recklessly, and future governments have to unrealistically cut spending."

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