Gov’t sets 2025 budget at 677.4 trillion won

The South Korean government has set its budget for next year at 677.4 trillion won, a 3.2% increase from this year's budget. Despite this rise, the government is maintaining a tight fiscal policy with spending growth in the low 3% range, following this year’s record-low increase of 2.8%. This marks the second consecutive year of austerity measures. As a result, the fiscal deficit is expected to shrink to within 3% of the Gross Domestic Product (GDP) for the first time in six years since 2019.

On Tuesday, the government held a Cabinet meeting to finalize the "2025 Budget Proposal." Deputy Prime Minister and Minister of Economy and Finance Choi Sang-mok stated, “While the spending growth rate for next year (3.2%) is higher than this year (2.8%), it cannot be considered a significant increase.” He emphasized that this is part of the process to normalize and strengthen the sustainability of finances, which had deteriorated significantly during the pandemic. The former Moon Jae-in administration had an average budget increase of 8.7%, a fiscal factor that had shifted from being an asset to a risk for the Korean economy, and the current government aims to reduce this growth by more than half to address concerns over fiscal soundness.

“The former administration increased the national debt by more than 400 trillion won over five years, making it difficult for the government to function due to the increased financial burden,” said President Yoon Suk Yeol at the Cabinet meeting on the day. The president pointed out that while the accumulated national debt between 1948 and 2017 was 660 trillion won, it skyrocketed to 1,076 trillion won during the former administration.

In line with its austerity stance, the government plans to secure necessary funds through a 24 trillion won spending restructuring. Over the next five years, 20 trillion won will be allocated to support healthcare reform, with 300 billion won earmarked next year for training medical residents to enhance essential medical services. "We plan to significantly increase the healthcare-related budget from approximately 800 billion won this year to 2 trillion won next year to adequately invest in healthcare reform," an Economy and Finance Ministry official noted.

The budget for research and development (R&D), which faced significant cuts this year, has been set at 29.7 trillion won, restoring it to the 2023 level of 29.3 trillion won before the cuts. The government plans to invest 3.5 trillion won in three ‘game-changer’ industry areas, including artificial intelligence (AI), to become one of the world's top three global powers by 2030. The budget proposal will be submitted to the National Assembly on September 2, with a legal deadline for approval by December 2.


Do-Hyong Kim dodo@donga.com