Concerns Over Low Effectiveness of Budget Allocation for Youth Leap Account Launching Next Year

[Asia Economy Reporter Song Hwajeong] The Financial Services Commission has allocated a budget of 352.7 billion KRW for 2023 to support the Youth Leap Account, which will be launched next year. The Financial Services Commission plans to support the Youth Leap Account by providing government contributions and funding for system construction and maintenance to the Korea Inclusive Finance Agency. Since the Youth Leap Account is a large-scale fiscal expenditure project operating over 10 years, there are opinions that a thorough review of the project's effectiveness is necessary.

According to the National Assembly Budget Office on the 27th, specifically, 344.037 billion KRW was allocated for contribution support on personal deposits, 8.581 billion KRW for infrastructure construction such as building and operating a household income screening system and establishing and operating an income screening center within the Korea Inclusive Finance Agency, and 154 million KRW for supporting the operation of the Youth Leap Account system. The Financial Services Commission estimates the expected number of subscribers to the Youth Leap Account to be about 3.06 million people and, based on contribution payment limits by personal income bracket (monthly 400,000 to 700,000 KRW) and matching rates (up to 6%), estimates that about 700 billion KRW in annual contributions will be required. Considering that the account will be launched in June next year and deposits will be accepted from July, only 50% of the annual contributions were calculated, totaling 344.037 billion KRW.

The Youth Leap Account, promoted as part of the government's national agenda to support asset formation among young people, is planned to be launched in June 2023. It is structured so that young people aged 19 to 34 with an individual income of up to 60 million KRW per year and household income below 180% of the median can make deposits within the deposit limit for five years, and the government will provide differentiated contributions based on personal income proportional to the amount deposited. The Financial Services Commission plans to allow subscriptions to the Youth Leap Account for five years from 2023 to 2027 and operate the product until 2032, expecting a fiscal expenditure of 2.4307 trillion KRW by 2026. The annual fiscal input scale is 352.772 billion KRW in 2023, 688.446 billion KRW in 2024, 693.152 billion KRW in 2025, and 696.381 billion KRW in 2026.

Given that the Youth Leap Account is a large-scale fiscal expenditure project operating over 10 years, there are opinions that a thorough review of the project's effectiveness is necessary. Kim Yoonseong, a budget analyst at the National Assembly Budget Office, said, "Since subscriptions will be possible until 2027 and contributions will be paid to subscribers until 2032, large-scale fiscal expenditures are expected for operating the Youth Leap Account. Therefore, it seems necessary to conduct a thorough review not only of the 2023 budget but also of the total fiscal input scale, project duration, target groups, and the validity and appropriateness of the project effects from a comprehensive perspective."

There are also concerns that the Youth Leap Account may have low expected effectiveness because it has low linkage with other youth support policies, unlike other youth asset formation products. Analyst Kim said, "The policy goal of the Youth Leap Account is asset formation and lump-sum savings for young people, which differs from other policies. It has low linkage with the government's ultimate goals such as housing and living security for youth and employment promotion, so the effectiveness of fiscal input may be lower compared to other projects."

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