Public sector’s 2014 surplus is the first in 7 years

The public sector ended 2014 in the black for the first time in seven years, the Bank of Korea said on Tuesday.

Total revenue in 2014 generated by government entities, non-financial state-run companies and public financial firms rose to 710.3 trillion ($610.8 billion) won last year, up 4.4 percent from 2013.

Public spending was 694.3 trillion won, up 1.7 percent for the year, for a net surplus of 16 trillion won.

Public businesses as a group last saw a surplus in 2007, when it was 17.6 trillion won. Since then, massive public works projects, including the Four Rivers Project, the construction of “innovation centers” across the country and large housing programs turned that black ink to red.

Revenue growth was up in large part because of higher taxes and increased revenue from real estate transactions by government-owned developers, the central bank said.

“Korea Land and Housing Corporation’s earnings improved because it managed to sell off part of its housing inventory last year. Energy firms’ revenues also increased,” said Han Sang-gyo, a statistician at the bank. “New investments in social overhead capital decreased, and spending related to land purchases also dipped because the relocation of public facilities has almost been completed.”

The ratio of public sector expenditure to gross domestic product fell to 47 percent, down from almost 52 percent in 2009, when the public business deficit was 57.8 trillion won.

Direct revenue at all levels of government rose to 493 trillion won last year, up 19.9 trillion won or 4.2 percent from 2013. Tax revenues were up from 260.2 trillion won in 2013 to 271.7 trillion won last year, accounting for more than half the total increase in revenue. In addition, pension plan contributions and government health insurance premiums amounted to 119.9 trillion won, up from 110.8 trillion won a year earlier.

Expenditures by all government levels increased by 4.5 percent, or 20.5 trillion won, to 474.5 trillion; the bank said that was a result of increases in benefits for the elderly and youth. As a result, the surplus in government spending was lower last year, by half a trillion won, than the surplus of the previous year.

Central government direct spending exceeded revenue by 28.5 trillion won last year; local governments were 6 trillion won in surplus. Contributions for social benefits programs pushed the total account to a surplus.

BY PARK JUNG-YOUN [park.jungyoun@joongang.co.kr]