The government’s proposal of maintaining a tight budget in 2025 illustrated its commitment to fiscal policy normalization amid the tax revenue shortfall, but calls for greater fiscal policy roles have also grown in the face of weak domestic demand and longer-term growth momentum, experts said Tuesday.

The finance ministry proposed a 3.2 percent on-year increase in next year’s budget to 677.4 trillion won (US$509.71 billion). Last year, it proposed 2.8 percent budget growth for 2024, the smallest level since 2005.

If the National Assembly approves the proposal, the annual growth rate of the state budget will come to 3.9 percent during the first three years of President Yoon Suk Yeol’s five-year term, and it would mark the lowest level for any administration ever. The comparable figure for the preceding Moon Jae-in government came to 8.6 percent.

The Yoon government has been pushing for belt-tightening measures in a shift from years of expansionary fiscal spending due to the falling tax revenue, inflation a
nd the need to ensure longer-term financial sustainability, among other issues.

“The government initially planned to increase next year’s spending by 4.2 percent, but we’ve decided to focus more on bolstering financial soundness and to maintain tight fiscal policy,” senior finance ministry official Yoo Byung-seo said.

Source: Yonhap News Agency