Deficits above 100 trillion won demand fiscal discipline

 

President Lee Jae Myung delivers a policy address on the 2026 supplementary budget at the National Assembly on April 2. [JOINT PRESS CORPS]

 
Government finances recorded a deficit exceeding 100 trillion won ($66.7 billion) for a second consecutive year in 2025, highlighting mounting concerns over fiscal sustainability. According to the government’s fiscal report approved Monday, the combined debt of central and local governments surpassed 1.40 quadrillion won for the first time, reaching 49 percent of GDP.
 
The widening deficit reflects continued expansionary spending that has outpaced fiscal capacity. If such policies persist amid a prolonged conflict in the Middle East, pressure on fiscal soundness is likely to intensify and leave limited room for policy response.
 
The management fiscal balance, a key indicator of fiscal health, showed a deficit of 104.2 trillion won, or 3.9 percent of GDP. Although slightly improved from the previous year, it remains well above the government’s fiscal rule threshold of minus 3 percent. In international comparison, Korea’s debt is rising rapidly. The general government debt ratio, which includes liabilities of noncommercial public institutions, climbed to 56.7 percent of GDP, ranking 19th among 37 major economies, up sharply from 30th place in 2008.
 
Concerns are also growing over the accuracy of tax revenue forecasts. Even accounting for strong semiconductor exports, a discrepancy of about 25 trillion won emerged within just three months of the fiscal year. Such a gap is difficult to attribute to a simple technical error. Inaccurate projections can distort budget planning, create room for additional spending and undermine policy credibility.
 

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The recent controversy over a supplementary budget reflects these concerns. The government described the plan as one that would not require additional government bond issuance, but analysis by the National Assembly Budget Office suggests otherwise. Without the supplementary budget, excess tax revenue would have been carried over as surplus and more than half used to reduce national debt. Redirecting these funds to spending has an effect similar to issuing new debt.
 
As fiscal rules, transparency and revenue forecasting come under strain, the risk of what some describe as “fiscal addiction” increases. Rising debt ultimately shifts the burden to future generations. Young people already facing a difficult job market may bear the cost if debt continues to accumulate under the justification of short-term economic support.
 
Even in times of crisis, fiscal resources must be allocated with discipline and precision. As the National Assembly reviews the supplementary budget, described as a “wartime budget,” it should carefully screen out unnecessary or populist spending and focus on measures that are both necessary and sustainable.


This article was originally written in Korean and translated by a bilingual reporter with the help of generative AI tools. It was then edited by a native English-speaking editor. All AI-assisted translations are reviewed and refined by our newsroom.