[2022 Budget] National Debt Ratio Surpasses 50% for the First Time... 200 Trillion KRW Surge in Spending Over 5 Years of Moon Administration

Ministry of Economy and Finance Announces 2022 Budget Plan... 8.3% Increase to 604.4 Trillion Won
'Expansionary Fiscal Policy' Trend, Budget Size 1.5 Times Larger in Past 5 Years... National Debt Swells to 408.1 Trillion Won, Surpassing 1000 Trillion Won for First Time
Temporary Improvement in Fiscal Balance Due to Increased Tax Revenue

[Sejong=Asia Economy Reporter Son Seon-hee] Next year, the national debt-to-GDP ratio in South Korea will exceed 50% for the first time in history. The national debt will also surpass 1,000 trillion won. This is the result of expansionary fiscal policies pursued throughout the five-year term of the Moon Jae-in administration. As the government plans to allocate a budget exceeding 600 trillion won next year, the total increase in expenditure over five years has reached more than 200 trillion won.

On the 31st, the government held a Cabinet meeting chaired by President Moon Jae-in to review and approve the '2022 Budget Proposal' and the '2021-2025 National Fiscal Management Plan,' which included these details. According to the budget proposal, the size of the budget prepared by the government for next year is 604.4 trillion won, an 8.3% increase compared to this year (based on the main budget). The government emphasized that this is the 'last budget of the Moon Jae-in administration' and explained that it has significance in completing the achievements of the five years in office.

In his opening remarks, President Moon said, "For 'complete recovery and a strong economy,' next year's budget was also prepared expansively," adding, "There is still a long way to go to achieve full recovery, and to respond to the massive changes such as the reorganization of global supply chains, changes in the international trade order, and the transition to a low-carbon and digital economy, an active role of fiscal policy remains essential."

However, as the total expenditure growth rate has exceeded the nominal growth rate for five consecutive years, deterioration of the fiscal situation has become inevitable. With a deficit budget where expenditures exceed revenues for three consecutive years, the national debt next year is expected to increase by 112.3 trillion won from this year, reaching 1,068.3 trillion won. Accordingly, the Moon Jae-in administration will have added more than 408 trillion won in national debt during its term. The debt-to-GDP ratio will rise to 50.2%, an increase of 14.2 percentage points from 36% at the start of the administration.

When the Moon Jae-in administration took office in 2017, the national budget was 400.5 trillion won, which was inherited from the previous government. Starting in 2018, when the current government began preparing the budget, welfare spending was significantly increased, causing expenditures to grow rapidly. The total expenditure growth rate recorded 7.1% in 2018 and then 9.5% in 2019, marking the highest rate in 10 years since the 10.6% increase in the 2009 budget during the global financial crisis. Subsequently, due to the COVID-19 pandemic, the expansionary fiscal policy continued with annual total expenditure growth rates reaching 8-9%, causing the budget size to increase by 1.5 times in just five years.

The integrated fiscal balance deficit for next year is expected to ease to 55.6 trillion won compared to this year, due to anticipated increases in tax revenues. The managed fiscal balance deficit, which excludes social security fund balances from the integrated fiscal balance to show the actual state of national finances, is also expected to improve to 94.7 trillion won from 126.6 trillion won during the second supplementary budget this year. However, the government forecasts that the fiscal balance will gradually deteriorate again after 2023. The government plans to submit the budget proposal to the National Assembly on the 3rd of next month.

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