"Tightened Budget Next Year Causes Economic Instability and Fiscal Concerns Due to Tax Cuts"…Democratic Party Warns of Weakened Economic Response and Revenue Base

Government's Supplementary Budget This Year Set at 639 Trillion Won, 40.5 Trillion Won Less Than Total Expenditure of 679.5 Trillion Won

[Image source=Yonhap News]

[Asia Economy Reporter Naju-seok] The Democratic Party of Korea pointed out that next year’s government budget, with its austerity measures, could cause economic instability, while tax cuts could undermine the revenue base and lead to fiscal instability.

On the 30th, the Democratic Party commented on the government budget, stating, "Considering past experiences and the difficult economic situation next year, the austerity-budgeted next year’s budget is a budget that may fail to sustain the economic recovery trend and may hold it back, causing economic instability." They noted that past austerity measures negatively impacted economic growth.

The government prepared a next year’s budget of 639 trillion won, which is 40.5 trillion won less than this year’s supplementary budget total expenditure of 679.5 trillion won.

The Democratic Party said, "Considering that next year’s economy in our country is by no means optimistic, the erosion of economic growth due to austerity is a very serious problem," adding, "The government and ruling party should keep in mind that economic instability caused by austerity during difficult economic times could worsen the livelihood difficulties of the middle and lower classes, who are already suffering from high inflation." The government forecasted an economic growth rate of 2.5% for next year, while the International Monetary Fund had expected 2.9% growth in April this year but revised it down to 2.1% in July.

Although the government advocates sound fiscal management, concerns have been raised that tax cut policies could cause fiscal instability.

The Democratic Party stated, "Looking at the 2023 national tax revenue plan, the government should expand revenue to maintain a sound fiscal stance, but it has instead undermined the revenue base," adding, "The national tax revenue plan was 400.5 trillion won, only 3.9 trillion won more than this year’s supplementary budget of 396.6 trillion won," and pointed out, "(This is) because the government reduced national tax revenue by 6.4 trillion won in 2023 due to tax cuts." Regarding this, the Democratic Party said, "If the government and ruling party want to manage finances soundly, they should first reconsider the policy stance that undermines the revenue base and weakens the fiscal counter-cyclical function through austerity."

Democratic Party lawmaker Park Jung said, "Fiscal policy should be a source of hope, not anxiety, for the people," and added, "During the National Assembly review process, we will push to increase the budget for projects for the people, including those for livelihood that were cut."

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