This photo, provided by the finance ministry, shows a panel showing the government’s budget proposal for 2025 during a press briefing in the central city of Sejong on Aug. 22, 2024. (Image courtesy of Yonhap)
SEOUL, Aug. 27 (Korea Bizwire) – The government on Tuesday proposed a budget of 677.4 trillion won (US$509.71 billion) for next year as it seeks to increase welfare spending for vulnerable people and prop up economic growth while ensuring fiscal health.
The proposed budget for 2025, endorsed by the Cabinet on the day, marks a 3.2 percent increase on-year following the slowest budget growth in nearly 20 years of 2.8 percent that the government presented last year for 2024, according to the Ministry of Economy and Finance.
Excluding mandatory spending, however, discretionary spending for next year logs a mere 0.8 percent on-year rise, as the Yoon Suk Yeol government has sought fiscal austerity amid the falling tax revenue and economic uncertainties after years of expansionary budgeting.
“Our fiscal sustainability was significantly weakened over the course of our responses to the COVID-19 pandemic, and the government is now working to normalize the situation and boost financial stability,” Finance Minister Choi Sang-mok told a press briefing.
“The government is to remove inefficient and overlapped parts and to spend more on welfare programs for vulnerable people and on efforts to revive growth momentum,” Choi added, stressing its continued commitment to budget restructuring.
To secure needed resources, the government slashed non-core expenditures worth 24 trillion won. It saved 23 trillion won this year through such a restructuring move.
The ministry plans to submit the budget proposal to the National Assembly early next month for approval.
This May 17, 2024, file photo shows a man checking job posts at an employment center in Seoul. (Image courtesy of Yonhap)
According to the proposal, the government will raise the budget for the health, welfare and labor sectors by 4.8 percent to 249 trillion won next year.
It seeks to increase the budget for education by 3.5 percent to 98.5 trillion won.
Major policy measures include raising the amount of basic living assistance for those in need, creating more jobs for senior citizens and increasing the allowance during parental leave to address challenges from population aging.
Up to 252,000 new public homes, a record amount, will be provided to help ensure stable housing.
Around 2 trillion won will be allocated to measures meant to address a shortage of doctors, particularly in essential medical fields and medical systems in rural areas, as it decided to boost the number of medical students by 2,000 starting next year.
The budget will be spent on the expansion of facilities and equipment at medical schools, the hiring of more medical professors, the improvement of working conditions for trainee doctors and the establishment of more children’s hospitals available on holidays and at night.
This file photo, provided by the industry ministry, shows Industry Minister Ahn Duk-geun (C) inspecting a semiconductor production line during a visit to a SK hynix plant in Icheon, 56 kilometers southeast of Seoul, on Jan. 11, 2024. (Image courtesy of Yonhap)
The budget for industries, as well as small and midsized enterprises, will go up 1.1 percent to 28.3 trillion won next year.
The amount includes 4.3 trillion won of cheap loans to be extended for those making a large-scale investment in the semiconductor sector. Some 1.7 trillion won will be used for measures to spur exports.
The proposal also called for an 11.8 percent increase in the budget for research and development (R&D) to allocate 29.7 trillion won, a record amount, for next year.
It marks a turnaround from this year’s sharp cut in R&D spending, a move that sparked concerns and criticism over possible negative impacts on basic research fields and longer-term productivity growth.
“We’ve been thinking about ways of consolidating R&D spending into effective and crucial parts. Next year’s focus will be on securing cutting-edge technologies in such advanced sectors as artificial intelligence, quantum and bio,” ministry official Kang Yoon-jin said.
The government called for 61.59 trillion won of defense budget for 2025, up 3.6 percent on-year, to better counter evolving nuclear and missile threats by North Korea and to increase salaries for service members.
The budget for official development assistance will be expanded to 6.7 trillion won from this year’s 6.3 trillion won, the ministry said.
Military personnel collect the contents of a trash-carrying balloon floated by the North that fell in Incheon, west of Seoul, on July 24, 2024. (Image courtesy of Yonhap)
Under the budget plan, South Korea’s national debt is projected to reach 1,277 trillion won in 2025, up from this year’s 1,195.8 trillion won. The debt-to-GDP ratio is forecast to rise to 48.3 percent from 47.4 percent.
The country’s managed fiscal balance is forecast to reach a deficit of 77.7 trillion won in 2025, narrowing from the shortfall of 91.6 trillion won this year.
This year’s deficit is equivalent to 3.6 percent of the gross domestic product (GDP), and it eyes to bring the figure down to 2.9 percent in 2025.
The government in 2022 announced a plan to introduce the fiscal rule that calls for capping the fiscal deficit at 3 percent of GDP, though the bill has yet to be passed.
(Yonhap)
