Hanwha Investment & Securities: "Government Shifts to Expansionary Fiscal Policy... Fiscal Burden Not a Major Concern"

Hanwha Investment & Securities analyzed on September 1 that the government's 2026 budget proposal represents an expansion of spending aimed at growth and recovery, and that fiscal burden is not yet a major concern.

On August 29, the government held a Cabinet meeting and approved the "2026 Budget Proposal." Total revenue is set at 674.2 trillion won, an increase of 22.6 trillion won (3.5%). Total expenditure has been set at 728 trillion won, up 54.7 trillion won (8.1%).

By sector, the rate of increase in funding for research and development (R&D) and the industry and small and medium-sized enterprises sector was 19.3% and 14.7% respectively. Kyuho Choi, a researcher at Hanwha Investment & Securities, explained, "R&D, along with general administration, had seen a decline in average annual spending from 2023 to 2025, but this time, the budget increase for R&D is the third largest after health and general administration. In contrast, funding for the diplomatic sector, which had seen continuous investment increases, has been reduced."

Regarding this expansionary fiscal policy, he assessed that it is not yet at a level that warrants immediate concern about fiscal burden. He stated, "While a deterioration of the fiscal balance is unavoidable, considering the recent slowdown in growth, it cannot be said that expansionary fiscal policy is a problem. Domestic consumption in July also improved due to domestic policy measures, so the growth effect from policy reinforcement is considered significant."

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