Ministries pushed to spend budgetMinister of Economy and Finance Hong Nam-ki pushed for more active fiscal spending to combat downward economic risks, calling for government branches to spend all of the 5.83 trillion won ($4.9 billion) supplementary budget by the end of this year.
“To improve the economic activity, there needs to be active spending in the consumption and investment categories,” said Hong during a senior ministerial meeting at the Central Government Complex in Seoul. “All the ministries should understand the grave economic situation […] and make the utmost effort to reach spending targets.”
According to the Finance Ministry, the government has spent 79.5 percent of the supplementary budget as of September, surpassing its target of 75 percent.
The Finance Minister’s emphasis on all-out spending comes as Korea will likely fail to meet the government’s target economic growth range for this year of 2.4 to 2.5 percent.
Exports have recorded on-year declines for a 10th consecutive month in September, while the country recorded negative inflation for the first time ever in the same month.
The economic uncertainties, combined with policy changes, have also weighed on tax collection, adding pressure on the government budget.
The Finance Ministry reported separately Tuesday that the country ran a budget deficit of 22.3 trillion won through August this year, while recording an operational budget balance, which excludes social security, of minus 49.5 trillion won.
The central government collected 209.5 trillion won in taxes until August, 3.7 trillion won less than the same period a year earlier.
The tax collection rate, which compares the actual amount collected to the target, stood at 71.1 percent, 1.5 percentage points down from the same period a year earlier.
The Finance Ministry blamed the increased share of value-added tax (VAT) allocated to regional governments for the shortfall in tax income.
Starting from this year, 15 percent of VAT is allocated to regional governments compared to the previous 11 percent in a bid to strengthen fiscal health.
That has come at a cost to the central government’s budget balance and the pressure will likely increase as 21 percent of VAT will be given to regional governments next year.
The government also cited disappointing corporate tax income. The Finance Ministry said it collected 11.9 trillion won in corporate taxes in August, a drop of 600 billion won from the previous year, due to broader weakness in business performance during the first half of the year.
BY CHAE YUN-HWAN [email@example.com]