August 30, 2023
SEOUL – The Cabinet on Tuesday approved the 2024 budget proposal worth 656.9 trillion won ($497 billion), marking the lowest on-year growth in nearly two decades as the country suffers from sluggish tax revenue.
The size of the second budget proposal drawn up by the Yoon Suk Yeol administration has increased by 2.8 percent from this year’s 638.7 trillion won, the smallest proposed increase since 2005. The budget for this year was 5.1 percent up on the previous year.
“Due to the past administration’s loose fiscal management, Korea’s national debts increased by 400 trillion won, surpassing 1,000 trillion won for the first time last year,” President Yoon Suk Yeol said at the Cabinet meeting held to approve the budget proposal, Tuesday.
“Increasing spending by issuing state bonds will burden future generations and lead to a deterioration in (the country’s) sovereign rating, increasing difficulties for businesses and the public economy,” Yoon said.
Finance Minister Choo Kyung-ho said the government even considered “0 percent growth” in the budget while drawing up the plan at a press briefing held on Aug. 24.
“We even looked at freezing the growth rate to 0 percent, but it was hard to make the choice as it would limit spending, which is required to secure public safety, prepare for disasters and handle the livelihoods of the public,” Choo said.
Korea’s national debt is expected to continue to grow rapidly, increasing by 61.8 trillion won next year, according to the government’s projection.
At the same time, tax revenues have been low. Korea set a revenue target of 400.5 trillion won for the year, but its first-half takings were 40 trillion won short of what was planned for the period, at 178 trillion won.
Next year’s tax revenue is expected to be even lower, coming in at around 367.4 trillion won.
The fiscal balance, excluding national and other public funds, is expected to record a deficit of 92 trillion won, 3.9 percent of the national gross domestic product. This surpasses the 3 percent cap which the government has been pushing for as part of its sound fiscal policy.
The Finance Ministry explained that a deficit of more than 3 percent would be unavoidable next year, but it will work on bringing it down starting in 2025 through tightened rules.
While tightening its belt on state spending, Korea plans to expand support for poorer households and multicultural families.
It will raise the basic living assistance by 13.2 percent. Under the scheme, a four-person household can receive 1.83 million won per month, up 213,000 won from this year.
For low-income multicultural families with children, the government will provide 400,000 won to 600,000 won per household to support education. It will also launch new programs to provide more job opportunities for members of those families.
The budget also aims to tackle the country’s chronically low birthrate. Preliminary figures released by the Statistics Korea in February show the country’s fertility rate fell to a low of 0.78 in 2022.
To encourage childbirth, the government has proposed to extend parental leave entitlements from the current 12 months to 18 months, while also lifting the limit for monthly payments. It will further allow parents of newborns to take out low-interest loans of up to 500 million won for housing purposes.
In light of the recent rise in stabbings, the government will provide handguns to all police personnel working in the field, involving a budget plan worth 8.6 billion won.
It will also designate 53.9 billion won to support counseling for high risk groups, providing help for a total of 1 million people with mental illness over five years.
To contract spending, the government cut 16.6 trillion won from the research and development budget, downsizing it to 25.9 trillion won. It also pulled down the education budget by 6.6 trillion won to 89.7 trillion won, considering the school-age population on decline.
Despite the R&D budget cut, it will allocate 5 trillion won, up 6.3 percent from this year, for national strategic technologies such as bio, quantum, space and semiconductors. For semiconductors, secondary battery and display industries, the government will earmark 1.6 trillion won to encourage the development of new technologies.
As Korea is dependent on energy imports, strengthening energy security is another goal for the next year, with the related budget increased from 2.4 trillion won to 2.7 trillion won. The budget for securing public reserves of key resources such as lithium and fuel will climb from 340 billion won to 550 billion won.
The Finance Ministry is scheduled to propose the budget bill to the National Assembly on Friday.