Last Year's National Budget Deficit 30 Trillion Won... First 3 Consecutive Years of Deficit Since IMF

MoF Announces February Issue of Monthly Fiscal Trends...Total Revenue Tentatively Estimated at 570 Trillion Won, Total Expenditure at 600 Trillion Won

[Asia Economy Sejong=Reporter Kwon Haeyoung] As prices and loan interest rates have surged since the beginning of the year, increasing the burden on ordinary citizens, the national budget recorded a deficit for the third consecutive year last year. This is the result of increased fiscal spending due to COVID-19, and it is certain that the government’s finances will again run a deficit this year, making the first-ever four consecutive years of deficit inevitable since statistics began to be compiled. Even with the new government taking office, it will be difficult to significantly reduce the spending that has once increased, raising concerns that fiscal soundness issues could hamper the Korean economy for years to come.

According to the 'Monthly Fiscal Trends and Issues February Edition' released by the Ministry of Economy and Finance on the 17th, the government’s national budget status, shown by the 'consolidated fiscal balance,' was tentatively estimated to have a deficit in the 30 trillion won range for the year 2021.

The consolidated fiscal balance is the figure obtained by subtracting net expenditures from net revenues of the central government. Last year, total revenues were estimated at 570 trillion won, and total expenditures at around 600 trillion won. The Ministry of Economy and Finance had projected a consolidated fiscal deficit of 90.3 trillion won based on the second supplementary budget last year, but due to a sharp increase in real estate tax revenues, national taxes collected exceeded initial expectations by 61 trillion won, reducing the deficit size somewhat. The deficit slightly widened compared to the cumulative deficit of 22.4 trillion won from January to November, which was forecast last month.

Looking in detail at last year’s total revenues, national tax revenues amounted to 344.1 trillion won, an increase of 58.6 trillion won compared to the previous year. The tax collection progress rate was 109.5%. Asset-related taxes centered on real estate, such as capital gains tax, inheritance and gift tax, comprehensive real estate tax, and securities transaction tax, surged sharply, and corporate tax also increased, resulting in a 61.2608 trillion won (21.6%) increase compared to the original budget (282.8174 trillion won). Non-tax revenues such as fines were estimated at 30 trillion won, and fund revenues at 196 trillion won.

Annual total expenditures reached a record high of 600 trillion won, increasing by 50 trillion won from the previous year due to COVID-19 damage support, quarantine response, and economic stimulus measures.

Thus, the government’s consolidated fiscal balance recorded deficits for three consecutive years: -12 trillion won in 2019, -71.2 trillion won in 2020, and around -30 trillion won in 2021. This is the first time since the foreign exchange crisis from 1997 to 1999 that a three-year consecutive deficit has occurred.

This is the result of the Moon Jae-in administration’s expansionary fiscal policy maintained from the early days of its term, further fueled by COVID-19. The government prepared two supplementary budgets last year, amounting to 14.9 trillion won and 34.9 trillion won respectively.

This year, the bitter new record of four consecutive years of national budget deficits is also within reach. The Ministry of Economy and Finance estimates that the consolidated fiscal deficit will reach 68.1 trillion won this year, including the first supplementary budget of 14 trillion won. Since statistics began in 1970, the consolidated fiscal balance has never recorded a deficit exceeding 10 trillion won for four consecutive years.

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