Government Embarks on 'Expenditure Diet'... Reduces Spending Growth Rate to Mid-4% Range Over 5 Years

2022~2026 National Fiscal Management Plan... Average Annual Total Expenditure Growth Rate of 4.6% Over 5 Years Presented

[Asia Economy Sejong=Reporter Kwon Haeyoung] The government has established a plan to lower the medium-term expenditure growth rate to the mid-4% range. The policy aims to normalize the fiscal condition, which deteriorated sharply under the previous administration due to COVID-19 response and welfare spending expansion, through expenditure control.

According to the Ministry of Economy and Finance on the 12th, the government presented an average total expenditure growth rate of 4.6% over five years in the 2022?2026 National Fiscal Management Plan.

Next year's total expenditure growth rate is 5.2%, but the government plans to gradually reduce the expenditure growth speed to 4.8% in 2024, 4.4% in 2025, and 4.2% in 2026. This is 1 percentage point lower than the average annual total expenditure growth rate (5.5%) for 2021?2025 announced by the Moon Jae-in administration last year.

The government set the average annual total revenue growth rate for 2022?2026 at 6.6%. This is about 2 percentage points higher than the 4.7% average annual growth rate for 2021?2025 released a year ago. It is interpreted as reflecting the impact of increases in income tax, corporate tax, and real estate tax revenues.

Although government revenue has increased, by controlling the expenditure growth rate to the mid-4% range on average annually, the managed fiscal balance deficit is estimated to decrease to 2.3% of Gross Domestic Product (GDP) by the end of 2025. This is half the level (4.6%) expected at the same point in last year's medium-term plan. The managed fiscal balance is an indicator that excludes the balances of the four major social security funds, including the National Pension, from the integrated fiscal balance, which is total government revenue minus total expenditure. It shows the actual state of the national finances.

National debt is expected to be 1,271.9 trillion won by the end of 2025, which is lower than last year's forecast of 1,408.5 trillion won.

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