S. Korea cuts next year’s budget growth to lowest level in 20 years

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South Korea’s budget increase for the upcoming year is expected to be the lowest in two decades. Despite the upcoming parliamentary elections, the government aims to tightly control budget expenditures related to local infrastructure development and other discretionary spending to maintain a conservative fiscal approach. This reflects President Yoon Suk Yul’s strong commitment to maintaining fiscal soundness as national debt continues to rise rapidly.

On Tuesday, the government held a cabinet meeting and decided to limit next year’s total budget expenditure to a 2.8 percent increase compared to the previous year. Accordingly, the government’s total expenditure, which was set at 638.7 trillion won ($483 billion) this year, will increase to 656.9 trillion won next year, up by 18.2 trillion won. The increase rate is the lowest in 20 years since fiscal statistics were compiled in 2005. It is notably lower than the projected economic growth rate of 4.9 percent for next year.

“Due to the previous administration’s lax fiscal management, national debt has increased by 400 trillion won, surpassing 1,000 trillion won for the first time last year,” Yoon said in opening remarks at the cabinet meeting. “We firmly rejected any budget being used for the purpose of buying votes and have transitioned to a sound fiscal policy. We will use the saved financial resources to provide more support for ordinary people, vulnerable classes and the socially weak.”

The government plans to allocate the saved funds to three core areas: welfare for vulnerable groups, national defense and law enforcement, and new growth engines.

The budget for the Saemangeum infrastructure project for the upcoming year was drastically reduced to 147.9 billion won, down 77.6 percent from the initially allocated budget of 662.6 billion won. The Ministry of Land, Infrastructure, and Transport announced that it will conduct a self-examination to verify the feasibility of the national project.

The government’s budget proposal will be submitted to the National Assembly early next month and is due to be finalized in December after undergoing legislative review.