Moon Administration's End-of-Term Budget Exceeds 600 Trillion Won

President Moon orders "Maintain expansionary fiscal policy next year"
Possibility of increase over 171 trillion won in 4 years
Expectations for welfare expansion, concerns over fiscal soundness deterioration

[Asia Economy Reporter Jang Sehee] The budget size for next year, the final year of the Moon Jae-in administration, is expected to exceed 600 trillion won for the first time on a total expenditure basis. When the current administration began drafting the budget in 2018, it was 428.8 trillion won, so there is a growing possibility of an increase of more than 171 trillion won in four years.

This is gaining credibility as President Moon Jae-in has actively called for fiscal expansion in next year’s budget, and the expenditure scale has already exceeded 600 trillion won through the second supplementary budget (supplementary budget) this year. However, concerns have also arisen that fiscal soundness will only deteriorate as revenue growth such as tax revenue is relatively slower than the budget, and the focus is expected to be on expanding welfare.

According to the government on the 9th, the Ministry of Economy and Finance is working on drafting the main budget to submit the ‘2022 budget bill’ by the 3rd of next month when the regular National Assembly session opens. Although it is based on the budget requests submitted by each ministry, there is speculation that it will increase as President Moon has ordered expansionary fiscal policy. President Moon stated at the end of last month at the Ministerial Meeting on Livelihood Economy, held shortly after the supplementary budget was drafted, "I believe it is necessary to maintain an expansionary fiscal stance at least until next year to support economic recovery and close the COVID-19 gap." A senior government official also mentioned, "We are focusing on inclusive growth to close the COVID-19 gap," and "We are actively exploring budgets related to demographic structure and industrial changes," not ruling out the possibility of expansion.

This differs from the previous conservative stance. The total expenditure budget for next year collected by the Ministry of Economy and Finance from each ministry is 593.2 trillion won, 6.3% more than this year. Also, in the ‘2020-2024 National Fiscal Management Plan’ submitted to the National Assembly in August last year, the government projected next year’s budget to be 589.1 trillion won, a 6% increase from this year.

Looking at total expenditures over the three years since the Moon Jae-in administration, it increased from 428.8 trillion won in 2018 to 558 trillion won last year, with an average annual growth rate of 8.7%. At the current growth rate, next year’s budget will be 603 trillion won. Notably, the only case where the new year’s main budget was smaller than the previous year’s supplementary budget on a total expenditure basis was in 2010. The total expenditure based on the 2009 supplementary budget during the global financial crisis was 301.7 trillion won, but the 2010 main budget was drafted at 292.8 trillion won, 8.9 trillion won less. In all other cases, the main budget was larger than the supplementary budget.

The problem is that an increase in national debt due to rising expenditures is inevitable. This year’s national debt, which was 956 trillion won based on the main budget, increased to 963.9 trillion won after the second supplementary budget. Considering the uncertain revenue outlook for next year, the possibility of entering the 1,000 trillion won national debt era has also increased.

There are also opinions that caution is needed since the government will change next year. A Democratic Party of Korea official said, "It is right to continue the expansionary fiscal stance, but we also need to consider fiscal capacity for possible supplementary budgets."

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