The South Korean government yesterday said it would run a fiscal deficit next year to help boost the economy, despite concerns over growing government debts.
The South Korean Finance Ministry said it wanted to increase government spending by 4.6 percent next year to 357.7 trillion won (US$332 billion).
The budget proposal for next year, endorsed by the Cabinet in a meeting yesterday, will be submitted to parliament by Wednesday.
The requested increase is lower than a 5.1 percent rise in this year’s budget, but it comes as next year’s government revenue is expected to fall 0.5 percent from this year, its first decline in four years.
The government would consequently run a fiscal deficit of 1.8 percent of GDP next year.
The ministry had planned to run a fiscal deficit of 0.3 percent for the year — but later decided to widen it to 1.8 percent with an increased budget for economic stimulus.
Overall sovereign debt will grow to 36.5 percent of GDP next year, up from this year’s 36.2 percent.
South Korean Finance Minister Hyun Oh-seok told journalists the ministry had put more emphasis on stimulating the economy rather than reducing fiscal deficits.
Under the budget request, welfare spending including health and employment is up 8.7 percent to 105.9 trillion won.
Defense spending is up 4.2 percent to 35.8 trillion won, including expenditure to buy satellites, spy drones and missiles used for defense against North Korean missiles.
Meanwhile, South Korea’s Incheon Airport has begun a US$4.6 billion expansion to increase its passenger handling capacity 41 percent by 2017, to better compete in an Asian race to become a regional hub.
Incheon joins rivals such as Singapore Changi Airport who are expanding to capitalize on increased traffic in Asia. Incheon is also looking to accommodate an influx of people arriving for the 2018 Winter Olympic Games in South Korea’s Pyeongchang County.
Incheon, which ranks ninth in international passenger traffic and second in cargo, yesterday held a groundbreaking ceremony for a second terminal capable of accommodating 18 million passengers a year, bringing total capacity to 62 million.
The expansion includes boosting annual cargo capacity to 5.8 million tonnes from 4.5 million.
The government-owned airport expects economic growth to push up Asia-Pacific air traffic by an annual average of 6 percent in the coming years, compared with a world average of 4 percent.
Nearby rival Hong Kong International Airport, which expects passenger numbers to rise from 56.5 million people last year to 102 million by 2030, is studying a third runway and expanded terminal.
Singapore Changi Airport, Southeast Asia’s biggest international airport by passenger traffic, is doubling its annual capacity to around 130 million passengers by the mid-2020s.
Incheon Airport opened in 2001 as the main airport of Asia’s fourth-biggest economy. It has seen annual passenger traffic grow by over 6 percent on average, thanks in part to a rise in Chinese and Japanese visitors attracted by South Korea’s increasingly prevalent popular culture.
Additional reporting by Reuters