‘Selection and concentration’ matters

In a Cabinet meeting Tuesday at the presidential office in Yongsan, the government decided to fix next year’s budget at 656.9 trillion won ($495.2 billion). The figure shows a 2.8 percent increase from this year’s budget and is the lowest growth rate since 2005. The growth rate of the budget is only one-third of the annualized growth of 8.7 percent between 2018 and 2022 during the Moon Jae-in administration. That’s the tightest budget ever in Korea.

In the meeting, President Yoon Suk Yeol underscored that his administration resolutely rejected the former administration’s tendency to resolve our economic and social problems simply by increasing the government budget. “We changed the direction of the fiscal policy toward building sound fiscal conditions,” the president said. At the same time, he pledged to provide sufficient financial support for the poor and underprivileged classes, including the socially weak, by shaving off the customary budget for pork-barrel projects aimed to attract votes ahead of elections. (The next parliamentary elections are held on April 10. )

It is unquestionable that the hefty budget management by the Moon administration caused our national debt to swell by 400 trillion won during its five-year term, critically damaged our fiscal health and dampened economic vitality in the private sector. When a country’s economy is in bad shape, fiscal integrity can help it recover from economic crisis. Earlier, Yoon said he was surprised to find the “lamentable fiscal condition nearly on the brink of collapse” when he took office last year.

But there are concerns about the possibility that the government’s over-the-top fiscal tightening will have a bad impact on the recovery of our economy in the longer run, particularly when its growth rate is stuck in the 1 percent range. The president emphasized the importance of “selection and concentration” in running the budget.

But we can hardly see the budgets needed to find new growth engines for the future despite an increase in spending for infrastructure and welfare. The government must not brush off the cases of major advanced countries bent on revitalizing their economy through drastic support for cutting-edge technologies.

The budget plan for next year was drawn up based on the fiscal deficit of 92 trillion won. The deficit-to-GDP ratio is also expected to grow to 3.9 percent, up 1.3 percent from this year. No matter how hard the government tries to cut unnecessary spending, it cannot uphold fiscal integrity if tax is not collected. We hope the legislature considers selection and concentration to help the government tackle the challenge of low growth.