South Korea plans to keep budget growth at its lowest in two decades in 2024


By Kang Yoon-seung

SEOUL, Aug. 29 (Yonhap) — The Ministry of Economy and Finance of South Korea has proposed a budget of 656.9 trillion won (US$495 billion) for 2024, the slowest rate of growth since 2005, as the nation seeks to tighten its belt amid economic uncertainties. The proposal marks a 2.8 percent increase from this year’s budget of 638.7 trillion won, a drastic decrease from the 5.1 percent growth seen in the previous year.

“The tax revenue for both the current year and 2024 continues to present challenges, as the nation’s fiscal landscape grapples with an enlarging deficit and an accumulated national debt exceeding 1,000 trillion won,” Finance Minister Choo Kyung-ho said in a statement. Choo added that the government has made a “prudent” decision to keep the rise below 3 percent to maintain the country’s sound fiscal health.

The finance ministry plans to submit the budget proposal, endorsed by the Cabinet on Tuesday, to the National Assembly on Friday for approval.

The latest restructuring of the budget came as the government has been vowing to achieve “sound fiscal health” while condemning the previous government for rolling out aggressive fiscal policies. The government especially allocated just 25.9 trillion won for research and development (R&D) projects, sharply down 16.6 percent from the 31 trillion won tallied for this year.

“(Over the previous years) the amount of the R&D budget has been rising 10.9 percent annually on average. Amid the sharp expansion of the budget, there have been some leakages and ineffective projects,” the finance minister said. Instead, the government vowed to focus its investment on cutting-edge areas with a goal of investing 5 trillion won in 12 key areas, including artificial intelligence, biotechnology and chips, marking a 6.3 percent rise on-year.

As for the welfare segment, the government plans to raise its budget by 7.5 percent to 242.8 trillion won to offer more support to vulnerable people. “Our intention is to take proactive steps by reinvesting the funds conserved through financial normalization into welfare initiatives for vulnerable individuals, fostering private sector growth and supporting projects focused on improving livelihoods,” Choo said.

In line with its efforts, South Korea plans to raise the amount of basic living assistance by 13.2 percent, while offering such benefits to around 45,000 additional households by lowering requirements. This would allow a four-member vulnerable household to receive 1.84 million monthly, compared with the current benefits of 1.62 million won.

To address climate change and seek low-carbon growth, the government allocated 12.5 trillion won for the environment sector, including the budget to speed up the installation of charging stations for electric and hydrogen-powered automobiles.

As for the industrial sectors, South Korea plans to spend 27.2 trillion won on the area in 2024, up 4.9 percent on-year, which will include support for exporters. The government will spend 1.9 trillion won to speed up the recovery of exports, up from this year’s 1.5 trillion won. The budget for official development assistance will be expanded to 6.5 trillion won from the previous 4.5 trillion won.

The 2024 budget includes 7.6 trillion won for diplomatic policies, including official development assistance programs, along with efforts to raise global awareness of North Korean human rights issues. The amount includes 130 billion won for reconstruction projects in Ukraine.

South Korea’s managed fiscal balance, meanwhile, is expected to reach a deficit of 92 trillion won in 2024, expanding from the shortfall of 58.2 trillion won this year. The deficit would be equivalent to 3.9 percent of the gross domestic product (GDP) in 2024, compared with 2.6 percent estimated for this year.

South Korea’s national debt is expected to reach 1,196.2 trillion won next year, up from 1,134.4 trillion won in 2023. The debt-to-GDP ratio will slightly rise to 51 percent from 50.4 percent.

The government set the goal of reducing the fiscal deficit to around 2.5 percent of GDP by 2027, improving from 2.6 percent in 2023. The country also has a plan to maintain the debt-to-GDP ratio at “the midpoint” of the 50 percent range through 2027.

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