National Debt Hits a Record 826 Trillion Won... Fiscal Deficit Approaches 100 Trillion Won (Comprehensive)

Ministry of Economy and Finance, Fiscal Trends January 2021 Issue

November 2020 Central Government Debt at 826.2 Trillion KRW... Up 13.4 Trillion KRW from Previous Month
National Tax Revenue Down 2.1 Trillion KRW · Total Expenditure Up 6.9 Trillion KRW

Cumulative National Tax Revenue in November at 276.8 Trillion KRW... Decreased by 8.8 Trillion KRW
Management Fiscal Balance Deficit of 98.3 Trillion KRW

[Sejong=Asia Economy Reporter Joo Sang-don] The scale of the national budget deficit surged to nearly 100 trillion KRW by November last year. The national debt reached a record high of 826 trillion KRW. This was because national tax revenue decreased by more than 2 trillion KRW while expenditures increased by nearly 7 trillion KRW due to the execution of the 4th supplementary budget. The fiscal deterioration trend is expected to continue for a considerable period as the government tries to mitigate the aftershocks of the COVID-19 pandemic.

According to the 'Monthly Fiscal Trend January Issue' released by the Ministry of Economy and Finance on the 12th, the management fiscal balance recorded a deficit of 98.3 trillion KRW as of November last year. The management fiscal balance is an indicator that subtracts social security fund balances from the integrated fiscal balance, showing the actual state of national finances. The deficit increased by 52.7 trillion KRW compared to 2019. The integrated fiscal balance showed a deficit of 63.3 trillion KRW.

During November alone, the fiscal balance turned to a deficit. In October, the integrated fiscal balance and management fiscal balance were surpluses of 21.5 trillion KRW and 17.9 trillion KRW respectively, but within a month, the integrated fiscal balance recorded a deficit of 4.3 trillion KRW and the management fiscal balance a deficit of 7.7 trillion KRW.

Central government debt stood at 826.2 trillion KRW, increasing by 13.4 trillion KRW from the previous month. Compared to the previous year, it surged by 127.3 trillion KRW.

Expenditures increased significantly, but revenues decreased. Total revenue in November last year (28.2 trillion KRW) decreased by 900 billion KRW year-on-year despite an increase in fund revenues, due to declines in national tax revenue and non-tax revenue. In October, all three?national tax revenue, non-tax revenue, and fund revenue?increased, resulting in an 8.5 trillion KRW rise.

National tax revenue in November was 14 trillion KRW, down 2.1 trillion KRW from the same month the previous year. Income tax was similar at 10.9 trillion KRW, but corporate tax revenue was 5.41 trillion KRW, decreasing by 300 billion KRW compared to a year earlier. Value-added tax decreased by 800 billion KRW due to reduced revenue and tax support, and transportation tax also fell by 1.3 trillion KRW.

From January to November last year, national tax revenue totaled 267.8 trillion KRW, down 8.8 trillion KRW from the same period the previous year. Although corporate tax declined, income tax and capital gains tax increased, and other national taxes such as comprehensive real estate tax, securities transaction tax, and stamp tax also rose by 3.4 trillion KRW.

With increases in non-tax revenue such as fines and fund revenue, total revenue rose by 2.4 trillion KRW to 437.8 trillion KRW. Fund revenue increased by 1.5 trillion KRW year-on-year in November alone, reaching 12.6 trillion KRW, due to rises in social security contributions and current transfer income.

The increase in total expenditure far exceeded total revenue. Total expenditure in November (32.6 trillion KRW) increased by 6.9 trillion KRW year-on-year due to the execution of the 4th supplementary budget projects and ordinary local government grants. Cumulative expenditure from January to November was 501.1 trillion KRW, up 57.8 trillion KRW compared to the same period last year.

Although the fiscal deficit is growing, the government’s expansionary fiscal policy is expected to continue. The government plans to spend 558 trillion KRW this year, issuing deficit bonds of 93 trillion KRW exceeding total revenue (478 trillion KRW). National debt will rise to 956 trillion KRW, reaching 47.3% of the Gross Domestic Product (GDP). This figure does not consider the supplementary budgets likely to be formulated this year.

Professor Sung Tae-yoon of Yonsei University’s Department of Economics said, "The pace of fiscal deficit expansion is too fast, and the increase in national debt is ultimately burdening the private sector as well. While fiscal spending cannot be avoided in crisis situations like COVID-19, it is necessary to use funds effectively and manage them so that the burden does not become too large."

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