Yawning fiscal deficit threatens goal

Faced with a 30 trillion won ($26 billion) fiscal deficit, the government may fail to meet its goal of achieving a balanced budget for next year.

The deficit widened during the first six months of the year due to increased budget spending to bolster the economy, the Ministry of Strategy and Finance said yesterday.

The consolidated fiscal account, which reflects the central government’s total income and expenditure, posted a deficit of 11.5 trillion won from January through June, compared with a shortfall of 2.3 trillion won one year earlier, the ministry said in a report.

The fiscal account, which excludes social security funds and is considered a more accurate reflection of economic realities, posted a deficit of 29.9 trillion won during the same period, compared with a deficit of 19.2 trillion won from a year earlier.

자료사진

“The wider deficit stemmed mostly from a sharp rise in consolidated fiscal expenditure, as the government front-loaded this year’s budget to bolster economic growth,” said an official at the ministry.

Spending shot up by 7.9 trillion won to 174.6 trillion won on-year, the data shows, while revenue raced up 8.8 trillion won to 163.1 trillion won.

The domestic economy grew 0.4 percent in the second quarter from the preceding three months, marking the slowest pace of growth since a 0.3 percent gain in the fourth quarter of 2011.

Against this backdrop, the government is considering releasing an additional 10 trillion won to boost the economy in the second half of 2013 based on the assessment that economic recovery is slower than it should be. It initially planned to add 8.5 trillion won over that period.

As the government shifts its policy from maintaining fiscal soundness to stimulating the economy, its goal of setting a balanced budget for next year seems increasingly like a pipe dream. “The ministry will need to revise its budget plan for next year after seeing how the economy fares in August and September,” said Finance Minister Bahk Jae-wan at a budget committee meeting held at the National Assembly early this week. “It is crucial to maintain fiscal soundness as much as possible, but we are not overly obsessed with balancing the budget.”

By Song Su-hyun [ ssh@joongang.co.kr]