639-trillion-won 2023 budget proposed by Yoon government
It is 5.2 percent higher than 2022's budget.
The increase is the smallest since the 3.7 percent increase in 2017. When supplementary budgets are included, 2023's budget is lower than 2022's. If would be the first drop in 13 years, unless extra budgets are passed next year.
Yoon's proposal must still be passed by the National Assembly.
A slow-growing budget is a reversal from the budgets of the previous administration. Spending rose an average of 8.7 percent a year under the Moon Jae-in administration on heavily job and welfare spending.
The government emphasized the need to improve fiscal soundness while refocusing the spending to boost the private sector.
"Amid a complex economic crisis, a safe fiscal plan is very important," Finance Minister Choo Kyung-ho said last week at a press briefing. "As such, the budget will be focused on fiscal soundness."
"We are reorganizing the role of the fiscal policy to support of an economy that is led by the private sector and the market," Choo said. "Our long-term goal is to keep the fiscal deficit at around 2 percent of GDP while managing the debt-to-GDP ratio in the mid-50-percent range."
The Bank of Korea last week revised its projection on inflation for the year from 4.5 to 5.2 percent. It also raised its projection for next year's from 2.9 percent to 3.7 percent.
"In a situation where we are at war with consumer prices, the government has no other choice but to be constringent," Yoon said on Monday.
Last year, despite the government collecting 60 trillion won more than it initially estimated, a fiscal deficit of over 30 trillion won was reported due to aggressive spending, which exceeded 600 trillion won for the first time.
A deficit was reported for three years running.
When excluding the four national insurances, the deficit-to-GDP ratio in the last two years exceeded 4 percent.
During the Moon government, national debt increased by 416 trillion won. The national-debt-to-GDP ratio rose from 36 percent in 2017 to 47 percent last year.
This year, the national debt is estimated to exceed 1,000 trillion won for the first time, while the debt-to-GDP ratio will be 49.7 percent.
Under the budget proposal, national debt will rise 6 percent to 1,068.8 trillion won. The debt-to-GDP ratio will be 49.8 percent.
The government's proposed budget ends temporary measures implemented during the Covid-19 pandemic, such as central government subsidies to local governments for regional gift coupons to boost local markets.
Compensation for business losses caused by the social distancing regulations implemented during Covid-19 will be ended.
The salaries of the president, ministers and vice ministers will be cut 10 percent. High-ranking public servants will have their salaries frozen. Lower-level public servant salaries will increase 1.7 percent.
Yoon's salary will drop by an estimated 24 million won.
It will be the first paycheck cut for high-ranking government officials since 2008.
The health, welfare and employment budget will rise 4.1 percent. Spending for quarantine will fall from 6.9 trillion won this year to 4.5 trillion won, while spending for temporary jobs especially for the elderly will be cut from 3.2 trillion won to 3.1 trillion won.
A total of 983,000 jobs will be funded, down from this year's 1 million.
The government says that funds will be shifted to create a better environment for creating jobs in the private sector. This includes 2.6 trillion won for vocation training, up 300 billion.
"We have made adjustments so that there will be less direct hiring of the elderly in simple jobs while encouraging an increase in job opportunities in the private sector," Choo said.
The education budget increased 14 percent to 96.1 trillion won.
Money will go to public education, continuing education programs and semiconductor-related education.
Funding for national defense rose 4.6 percent to 57.1 trillion won.
Salaries for sergeants will rise from 820,000 won to 1.3 million won a month, and this will increase to 2 million won by 2025.
Funding for R&D will increase 3 percent to 30.7 trillion won. This is the first time that the R&D budget exceeded 30 trillion won.
The government plans to fund R&D of seven key strategic technologies — semiconductors, 5G, mobility, space, bioscience, batteries and A.I. — and six new areas, including future energy, robotics and hyperloops.
The industry, SMEs and energy budget was lowered 18 percent to 25.7 trillion won.
Funding for renewable energy will fall 32 percent compared to this year's to 664.8 billion won.
The government cited the declining costs for renewable energy equipment and falling demand.
Nuclear energy funding has been increased from 483.9 billion won this year to 573.8 billion won next year, with 700 billion won being committed to nuclear energy R&D, including small modular reactors.
Support for SMEs was increased to 700 billion won from 600 billion won.
Income will total 499.5 trillion won, which is a 0.8 percent increase. Income tax revenue will increase 3 percent to 132 trillion won, corporate tax revenue will fall 0.1 percent to 105 trillion won and value-added tax revenue will increase 3.6 percent to 83.2 trillion won.
The government is planning to submit its budget proposal to the National Assembly on Friday.
BY LEE HO-JEONG [firstname.lastname@example.org]