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Korea to spend 342.5 trillion won in 2013

Next year’s budget aims to support public welfare and revitalize economy


The government plans to spend 342.5 trillion won ($305.6 billion) in 2013, an increase of 5.3 percent compared to the previous year, with the aim of boosting the sagging economy while maintaining fiscal health.

The Finance Ministry announced on Tuesday the final budget proposal to be presented to the National Assembly for approval.

According to the budget plan, the government will designate 10.8 trillion won to create about 600,000 jobs in consideration of a lack of jobs for youth and baby boomers. 

The government also allocated 97.1 trillion won for health, welfare and labor affairs, up 4.8 percent from this year.

It also said it would spend 49.1 trillion in education, up 7.9 percent from this year. State-funded scholarships will be hiked by 500 billion won.

Spending on national defense will also increase 5.1 percent to 34.6 trillion won. Soldiers’ salaries will increase by 15 percent.

The government also earmarked 4.1 trillion won for foreign relations and reunification, up 5 percent from this year.

In an effort to enhance the nation’s growth potential, the spending plan calls for 16.9 trillion won to be used on research and development.

A total of 23.9 trillion won will be used to increase expenditure on social infrastructure, which is an increase of 3.6 percent from a year earlier.

The increased spending is a way to boosed support for the local economy amid external instabilities caused by the protracted European financial crisis, rise of local consumer prices and slowdown of the employment growth, according to the ministry.

The ministry said it expects a total income of 373.1 trillion won in 2013, an 8.6 percent rise from 2012.

The government also expected gross domestic product growth to mark 4 percent next year.

“Although we are facing a difficult situation in terms of the nation’s finances, including tax revenues, we need active fiscal policies right now more than ever. Next year’s budget is planned in a way to support public welfare and revitalize the local economy while maintaining fiscal health,” said Vice Finance Minister Kim Dong-yeon at a press briefing held at the Government Complex in Gwacheon, Gyeonggi Province.

One notable change in terms of budgeting for next year is that 3.5 trillion won worth of government-run financial loans to companies and households will be transferred to the private sector. Private institutions will be operating the loans plus an additional 3.2 trillion won worth of funds supplied by the government. The government will provide the difference between the private interest rate and policy rate to the private institutions.

“By supporting the 6.7 trillion won through the revamped way of budget-running, we expect that the government’s actual total spending will increase 7.3 percent instead 5.3 percent,” said Kim.

The usable revenue of 3.5 trillion won produced through the new system will be used to react to economic changes (1.5 trillion won), public welfare (700 million won) and supporting local districts (1.3 trillion won).

According to the plan for 2012-2016 government spending, the national debt ratio is expected to decrease from this year’s 34 percent to 33.2 percent next year. The fiscal balance is predicted to have a 0.1 percent surplus in 2014 compared to the GDP, and reach a 0.5 percent surplus in 2016.

By Park Min-young  (claire@heraldcorp.com)
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