South Korea’s parliament on Saturday approved South Korean President Yoon Suk-yeol’s administration’s first full-year budget bill for next year, which cut total spending and the fiscal deficit from this year.
The approved budget, valued at 638.7 trillion won (US$498.89 billion) or 6 percent less than this year’s, is set to cut the fiscal deficit to 0.6 percent of GDP from 3.3 percent this year.
Out of the total, a bulk of 35.4 percent was allocated for public health, welfare and employment programs, followed by 15.1 percent for the education sector and 8.9 percent for national defense spending, according to the South Korean Ministry of Finance.
Photo: Reuters
Yoon has pledged since taking office this year to strengthen government finances, weakened in recent years by increased public spending to expand welfare programs and fight the COVID-19 pandemic.
South Korea’s government debt-to-GDP ratio has steadily risen to an estimated 49.7 percent this year from below 40 percent in 2019 and below 30 percent in 2010 as the country has expanded the welfare system as its population has been aging.
The ratio is set to hold almost steady at 49.8 percent next year.
Yoon’s government aims to contain the debt growth by keeping the fiscal deficit at 0.5 percent to 0.6 percent in each of the next several years, compared with 3.3 percent estimated for this year.
The economy is expected to decelerate next year due to weaker exports and still-elevated interest rates.
The Bank of Korea last month cut its growth forecast for next year to 1.7 percent from a previous 2.6 percent.
The South Korean National Assembly approved a proposed plan to cut the corporate income tax by 1 percentage point for each tax bracket, including cutting the top rate to 24 percent from 25 percent.
The parliament also delayed the introduction of a financial investment income tax by two years.
Additional reporting by Bloomberg
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