SEOUL, May 28 (Yonhap) — South Korea plans to take into account tax revenue situations and demand for increasing public finances before it decides on whether to draw up another extra budget in the latter half of 2021, a senior government official said Friday.
First Vice Finance Minister Lee Eog-weon also said the government will focus its economic policy on underpinning an accelerating economic recovery in the second half.
Talk of another extra budget emerged from the ruling party after President Moon Jae-in said Thursday the country needs to leave the door open for additional fiscal support.
Moon said at a national fiscal strategy meeting that the country needs to maintain its expansionary fiscal policy for the time being to cope with the fallout of the pandemic despite the growing national debt.
South Korea created an extra budget of 15 trillion won (US$13.5 billion) in March to finance another round of relief aid for smaller merchants and vulnerable people hit hard by the pandemic.
Since last year, the country has drawn up five rounds of extra budgets totaling 82 trillion won to tackle the economic fallout of the COVID-19 pandemic.
With the latest supplementary budget, the country’s government debt is expected to reach 965.9 trillion won this year. The debt-to-GDP ratio will likely reach 48.2 percent.
Last year, the country’s national debt grew by the largest-ever amount of 123.7 trillion won to a record high of 846.9 trillion won.
The finance ministry said the government’s fiscal balance is expected to improve over the next five years as the economic recovery gathers pace.
Asia’s fourth-largest economy contracted 1 percent last year amid the pandemic. The Bank of Korea (BOK) on Thursday revised up its 2021 growth outlook for the South Korean economy to 4 percent from its earlier estimate of 3 percent.
The country’s tax revenue increased 19 trillion won on-quarter in the first three months of the year to 88.5 trillion won.
Last year, the nation’s tax revenue fell 7.9 percent as corporate tax earnings declined amid the pandemic.
Global credit appraiser Moody’s Investors Service said in May that South Korea’s long track record of fiscal discipline is expected to be put to the test as its record high government debt will likely increase further.