As the National Assembly has started reviewing the budget for 2024, partisan wrangling is expected to intensify as the views of the rival parties differ considerably amid lingering worries about populist projects ahead of the election.
Lawmakers kicked off the review of the budget for next year on Wednesday, holding a public hearing about the appropriateness of the budget and fund utilization plans filed by the Yoon Suk Yeol administration.
The government presented a 657 trillion won ($489 billion) budget proposal for 2024, up only 2.8 percent compared to the 638.7 trillion-won budget for 2023. This is the smallest increase since 2005.
At the heart of the government’s 2024 budget is a strong belt-tightening effort, as clearly demonstrated by Yoon’s speech at the National Assembly on Tuesday. Yoon stressed the need for reducing unnecessary spending while extending more support for those in need.
In his speech, Yoon said that fiscal prudence was needed to stabilize prices, maintain South Korea's sovereign credit rating and avoid passing on more national debt to future generations.
Another factor that led to the government’s tight budget plan is the fall in fiscal revenue, hurt by the protracted economic slump and global uncertainties such as high interest rates and two major geopolitical conflicts.
This year alone, the national tax revenue is forecast to fall short by approximately 60 trillion won, sparking concerns about a possible fiscal revenue crisis.
Against this backdrop, the National Assembly is tasked with the critical role of scrutinizing budget projects to filter out nonessential or not-so-urgent ones in a bid to achieve fiscal soundness.
But the outlook for a consensus remains murky, as lawmakers from rival parties have very different ideas about what should be done to shore up the country’s sluggish economy and address the deepening fiscal revenue issue.
The Yoon administration and the ruling People Power Party share the view that fiscal prudence is needed in consideration of the national debt that exceeded 1,100 trillion won by the end of August.
In a town hall meeting Wednesday, Yoon said that an increase in the state budget will result in higher consumer prices in a way that hits the ordinary public, reiterating the need for austerity.
But the main opposition Democratic Party of Korea, which holds the majority at the National Assembly, claims that an expansionary budget is required to revive growth momentum at a time when the country is struggling with an economic downturn.
In response to Yoon’s belt-tightening policy, Democratic Party leader Lee Jae-myung criticized the move as an “obsession with fiscal soundness” and floor leader Rep. Hong Ihk-pyo expressed his disappointment, citing a cut in R&D and support for young people.
The spending cut in R&D for next year is expected to become one of the fierce battlegrounds between the rival parties. The National Assembly Budget Office said in a recent report that the R&D budget proposal for 2024 has been reduced by 5.2 trillion won, down 16.6 percent from 2023, but the government has not offered clear reasons for cutting funding for many of the projects involved.
Critics from the technology fields argue that the budget cut could terminate R&D projects prematurely, potentially turning existing investment into sunk costs, and undermine the future economic growth of the country. And the Democratic Party is planning to form a task force to review R&D budget details to put pressure on the government and the ruling party.
Aside from partisan conflicts over the budget, some lawmakers are already raising eyebrows by trying to secure pork barrel spending such as regional infrastructure projects to win nominations and secure votes in their constituencies ahead of the general election slated for April next year.
If the 2024 budget review is completed in the plenary session as scheduled by Dec. 2, the 21st National Assembly will effectively draw to a close. It is hoped that the last regular session will end with bipartisan cooperation for the welfare of people and the economic recovery instead of wasteful political strife.
