Party government reviewing plan to increase the main budget by 8%
Article 400 at the beginning of the inauguration of Wen… That’s an 8-9% increase every year.
18% P higher than MB during the financial crisis
Concentrate on small business loss compensation and vaccine purchase
The government is considering a plan to increase the main budget (total expenditure) next year to the 8% level, which is more than the original plan. In this case, next year’s budget will exceed 600 trillion won for the first time in history. This is an increase of 50% in five years from 400 trillion won in 2017, the first year of the Moon Jae-in administration. Next year’s budget is expected to focus on compensation for losses for small businesses, purchase and vaccination of vaccines, support for carbon neutrality, and resolution of polarization.
According to the Ministry of Strategy and Finance and the Democratic Party of Korea on the 22nd, the party government is in the process of finalizing the budget for next year. The Ministry of Strategy and Finance reported to President Moon Jae-in last week that it would increase next year’s budget to 7.5% from this year’s (558 trillion won), but it is known that it is considering an 8% increase. As the 4th pandemic of COVID-19 shows no sign of easing, we are discussing ways to increase the financial resources for loss compensation for small businesses and expand financial resources for future countermeasures such as carbon neutrality.
If the budget for next year is increased by 8% from this year, it will be 602 trillion won, and if it is increased by 8.5%, it will be 605 trillion won. The expansionary fiscal next year will continue next year, similar to 2019 (9.5% increase), 2020 (9.1%), and this year (8.9%). In the ‘2020-24 National Fiscal Management Plan’ submitted to the National Assembly last year, the budget for next year was projected at 589.1 trillion won, up 6% from this year, and it far exceeds that figure.
In 2017, the first year of the Moon Jae-in administration, the country raised 400 trillion won (400.5 trillion won), but it increased to 500 trillion won in 2020 (512.3 trillion won) and is about to exceed 600 trillion won in two years. The increase rate is 50% in 5 years. Compared to the previous government, the pace is very steep.
From 2007, when the budget was operated in the same system as the current budget due to the enforcement of the National Finance Act, the budget increase rate of the Lee Myung-bak administration was 32.5% (258.2 trillion won in 2008 → 340 trillion won in 2013) over five years. At the beginning of the government, fiscal spending increased significantly due to the global financial crisis, but it was put into management later. Although the Park Geun-hye administration was affected by a one-year short period, the budget increase rate was only 17.1% (340 trillion won in 2013 → 400.5 trillion won in 2017).
The government is struggling with how much to allocate to small business owners in the next year’s budget. As the revised Small Business Support Act came into effect last month, the government should compensate for damage to small businesses caused by quarantine measures such as a ban on gatherings. In the second supplementary budget passed by the National Assembly last month, 1 trillion won was organized as a source of compensation for losses. An official from the Ministry of Economy and Finance said, “We are considering the size of the budget for loss compensation because we cannot predict next year’s COVID-19 situation and quarantine measures.”
The Ministry of Finance also plans to fully reflect the budget related to vaccine purchase and vaccination. At the same time, carbon neutral support is set as a key investment item for next year and the related budget is being prepared. It is also focusing on bridging the gap between education and care, such as increasing child allowances and expanding national scholarships.
Reporter Lim Joo-hyung, Sejong hermes@seoul.co.kr
