The extra budget that the government recently drew up will likely delay achieving a fiscal balance until 2016 due to increased spending coupled with less-than-expected tax revenues, a government report showed Friday.
The government earlier unveiled a 17.3 trillion won ($15.4 billion) extra budget aimed at boosting the country’s slowing economic growth. This was the second largest since 2009 when it announced 28.4 trillion won in extra spending in response to the fallout from the global financial crisis.
Of the latest extra budget which is subject to parliamentary approval, 12 trillion won will be used to make up for a decline in revenues partly caused by the slowing economy. The government will also seek to issue about 16 trillion won in bonds to fund the spending.
According to the report submitted by the finance ministry to the National Assembly, the government forecast that it will be able to balance its fiscal account in 2016. It earlier predicted that the balanced budget would be achieved either this year or next year.
The forecast is based on its analysis of the fiscal account conditions which excludes profits from social security funds. The fiscal account compared with the country’s gross domestic product is expected to reach zero in 2016, which means achieving a balanced budget.
Earlier, the government expected the account would stay at minus 0.3 percent this year but turn around to 0.1 percent next year.
The massive extra budget, however, will likely worsen the ratio to minus 1.8 percent this year before steadily improving to minus 0.4 percent and minus 0.3 percent in 2014 and 2015, respectively, the report showed.
The report explained that the worsening fiscal status is due mainly to the government’s less-than-expected gross revenue forecast for the years to come and expanded spending to be enforced through the supplementary budget.
In particular, additional bond issuance will push up the government’s debt down the road.
The report forecast that the government debt will rise to 510.5 trillion won in 2015, exceeding the 500 trillion won mark for the first time. In 2016, the amount is expected to grow further to 524.3 trillion won. (Yonhap News)
