They Promised Rapid Execution... January Total Expenditure Progress Rate Down 1.3%P Compared to Last Year

As the government is promoting the rapid execution of the budget in the first half of the year to revitalize the economy, it has been revealed that the total expenditure progress rate in January this year actually decreased compared to the same period last year. The government attributes this to the delayed establishment of project plans due to the late approval of this year’s budget and plans to accelerate rapid execution going forward.

According to the "March Fiscal Trends" announced by the Ministry of Economy and Finance on the 16th, the total budget expenditure in January this year was 51.1 trillion won, down 5.2 trillion won compared to the same period last year. This was because the approval of this year’s budget was delayed by more than 20 days beyond the legal deadline, causing a delay in the establishment of project plans. Consequently, the total expenditure progress rate in January was 8.0%, a decrease of 1.3 percentage points from last year’s progress rate of 9.3% for the same period. The government had previously set the rapid budget execution target for the first half of this year at 242.9 trillion won, with a progress rate of 65.0%. A Ministry of Economy and Finance official stated, “Considering that the legal deadline for budget approval is December 2 every year, last year’s approval was delayed until December 24, about 20 days late, which significantly delayed the start of expenditures due to preparatory procedures before execution. However, rapid execution is expected to proceed without issues going forward.”

During the same period, national tax revenue was 42.9 trillion won, down 6.8 trillion won compared to the same period last year. All three major pillars of national tax revenue?income tax, corporate tax, and value-added tax?decreased. Income tax, mainly capital gains tax, decreased by 800 billion won due to a contraction in real estate transactions. As of November last year, housing sales volume dropped 55.0% year-on-year, and pure land sales volume also decreased by 39.2%. Corporate tax decreased by 700 billion won due to a base effect from tax deferrals in January 2022 following tax support measures in the second half of 2021. This is interpreted as resulting from the extension of the mid-term prepayment deadline for small and medium-sized enterprises from August to November in August 2021, which deferred installment payments. Value-added tax also decreased by 3.7 trillion won. The progress rate of national tax revenue in January was 10.7%. Excluding the base effect of tax deferrals (5.3 trillion won), the actual tax revenue decrease was about 1.5 trillion won. Non-tax revenue totaled 2 trillion won due to an increase in penalty income (400 billion won), and fund revenue totaled 16.5 trillion won.

During the same period, the management fiscal balance, which shows the fiscal status of the national budget, recorded a surplus of 7.3 trillion won, an increase of 700 billion won compared to the same period last year. The management fiscal balance excludes the social security fund (3 trillion won surplus), and the integrated fiscal balance (total revenue minus total expenditure), which includes it, was 10.3 trillion won, with a surplus margin of 1.3 trillion won. The management fiscal balance recorded deficits for two consecutive years in 2020 (-1.7 trillion won) and 2021 (-1.8 trillion won), but turned to a surplus of 6.6 trillion won in 2022.

The issuance volume of government bonds in February was 13.4 trillion won. The Ministry of Economy and Finance analyzed that recently, government bond yields have become more volatile due to the impact of the U.S. Silicon Valley Bank (SVB) bankruptcy and uncertainties in major countries’ monetary policies. The issuance volume of government bonds from January to February was 28.2 trillion won, accounting for 16.8% of the annual total issuance limit. The procurement yield in February remained in the mid-3% range, similar to January, and the bid-to-cover ratio maintained a stable flow at 282%, exceeding last year’s average. As the incentive for fiscal arbitrage, which worsened at the beginning of the year, somewhat recovered, foreign net investment in government bonds turned positive for the first time in three months in February, and the holding ratio of government bonds remained in the 20% range. The Ministry of Economy and Finance stated, “We will strengthen monitoring of reinvestment trends after the maturity repayment of government bonds in March, continue efforts to improve the foreign investment environment, and pursue inclusion in the World Government Bond Index (WGBI).”

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