The government has announced the next year's budget, which has been formulated with an expanded budget of 555.8 trillion won.
This is an increase of 8.5% compared to this year's budget, and this is an increase of 1.6% even when taking into account the expenditure of the supplementary budget, organized up to the third round.
Expenditure has increased by 8~9% for 3 consecutive years.
Debt is also expected to increase so that the ratio of national debt to GDP will increase to 46.7%.
Hong Nam-ki, Deputy Prime Minister of the Economy and Minister of Strategy and Finance, who is the chief executive officer of the government's budget plan, summarized the budget under three keywords.
1) Driving the economic recovery 2) The Korean version of the New Deal 3) Nationality and visualization.
It is not a clear story, but to put it roughly, it is a budget aimed at a strong economic rebound after the coronavirus.
Even if it slightly undermines fiscal soundness, we will try to recover the economy by pouring out our finances.
It is a budget mixed with anticipation that next year Corona 19 will calm down rather than now.
In addition, nearly 20% of the total budget is poured into the'Korean version of the New Deal' project that aims to transform into a digital and eco-friendly economy.
Next year is the first year of the actual budget for the New Deal policy.
The amount is 21.3 trillion won.
In addition, a large budget has been set for strengthening the social safety net, such as the employment safety net for those affected by the corona economy.
The Ministry of Strategy and Finance is the chief financial officer.
Usually, it plays a role in shaving and reducing the budget of the business that other ministries want.
What does Deputy Prime Minister Hong, who is announcing the second budget proposal after taking office, think about an annual average of 8.8% increase in spending?
We summarized one question and one answer to the briefing of Deputy Prime Minister Hong.
Q. Expenditure growth rates for the third consecutive year were 9.5%, 9.1% and 8.5%.
There are many people who think that the increase in the rate of expenditure is too high and that the increase in the national debt ratio is excessive. What is the view of the Vice Prime Minister?
A. There was a major global economic downturn last year and this year's corona economic crisis, so in these difficult times, the government had two choices.
Will the fiscal role build up such a virtuous cycle system that can actively raise the growth rate and restore fiscal soundness in the role even if low growth is expected through the financial role of an appropriate size?
The government thought that it would be a better decision to play a fiscal role through increased expenditures even if the national debt and income deteriorate slightly.
Since last year and this year were relatively difficult, we were not alone in strengthening our fiscal role, and most advanced countries, including the G20 countries, pursued such measures together.
Rather, in the midst of that, it was reflected that we have more financial capacity than other countries.
At the same time, efforts were made to suppress the growth rate as much as possible in consideration of fiscal soundness and future fiscal demand.
Q. In academia, a deficit fiscal or if it exceeds the GDP growth rate or gross income is called an extended fiscal.
The next year's budget was called the expanded fiscal, but from the perspective of the public, it was 9% last year, but in the corona crisis situation, the rate of increase for next year has been lowered.
What is the standard for expanded finance that the Vice Prime Minister is talking about?
A. I can tell you three criteria for judging whether or not the expanded finance is available.
One is the difference between the growth rate of gross income and the growth rate of total expenditure.
So, it can be said that it is the difference between an increase in revenue and an increase in expenditure.
This time, the total income growth rate is 0.3%, whereas the total expenditure growth rate is 8.5%, so the difference between the two growth rates will be 8.2%.
That was 7.9% this year.
This further increase will be one criterion that can show whether to redefine the expansion.
The second is how much the total expenditure growth rate exceeded the current growth rate.
This year, the total expenditure growth rate was 9.1%, and the ordinary growth rate was 3.8%, the difference was 5.3%.
Next year, the total expenditure growth rate will increase by 8.5% and the ordinary growth rate will increase to 4.8%, so the difference will be 3.7%.
According to this standard, although it is a little lower than this year, the total expenditure growth rate is far exceeding the current growth rate.
Third, it will be the Fiscal Impulse (FI) index.
It's called the fiscal shock index.
It is an index produced by the IMF.
If this FI index is greater than 0, it is judged as expansive fiscal, and if it is less than 0, it is judged as tight fiscal. The FI index was 1.7 this year.
If we calculate by that formula, next year 2.0 will come out.
So in that sense, it can be seen as an expansion finance.
Q. It is said that the fiscal rules should be introduced continuously, so please ask for the position of the Vice Prime Minister.
A. Recently, as we overcame the economic crisis and corona crisis, the rate of fiscal growth has been very high.
Therefore, the government debt and fiscal capacity for fiscal balance has been considerably weakened, so it is considered necessary to establish fiscal rules.
When we studied fiscal rules, 92 countries around the world have introduced and operated fiscal rules.
In any form, I believe that fiscal rules need to be introduced in Korea, and I am reviewing them now.
We will finalize and announce this in September.
However, with the fiscal rules, we plan to present fiscal rules by reinforcing various flexibility, such as acknowledging a situation in which a very extreme crisis like this corona crisis has come and the finances must play a role as an exception.
Q. It is related to the mid-term fiscal management plan.
According to last year's plan, it was said that the national debt ratio would remain in the mid-40% range, but it reached the 50% level in one year.
On the other hand, the tax burden rate and the national burden rate have a little lower.
Then, in the end, it means that the tax revenue has decreased, and accordingly, there may be an increase in taxation. If that is the case, is there no need for other measures?
A. The national debt to GDP will be in the 46% range next year.
It was 43.5% until this year, but it will increase by more than 3%p.
The share of national debt was inevitably increased with three additional additions this year.
In order to reduce this as I said earlier in the next year, in fact, if the revenue growth rate is higher than the fiscal expenditure growth rate, this burden can be reduced. This is not the case. I would like to tell you that I went to the 46% range.
You asked if there were any symptoms.
I would like to tell you that the government did not consider any tax increase in the budget for next year.
This is to say that, as we announced last time, the tax reform plan was tax-neutral.
In fact, regarding the increase in taxation, there should be a public consensus on the large-scale increase in taxation, so I think it is another issue that should be considered separately.
For the government, major measures will be to restructure expenditures to reduce expenditure, reduce non-taxation reductions in terms of revenue, and discover sources of taxation.
Q. When Fitch said earlier this year, when it comes to the sovereign debt ratio, when it reaches 46% in 2023, there is a risk of a credit rating downgrade.
Actually, if you look at the financial management plan, it is about 50%, so you may be worried about it.
A. You told me whether or not the national credit rating has changed in connection with the increase in national debt.
We have a discussion with the pitch in September.
It is scheduled.
There are a number of factors that, including Fitch, probably contribute to rating agencies' sovereign ratings.
There are a number of factors including the country's economic situation, fundamentals, debt, and income.
One of them will, of course, be the level of sovereign debt.
In particular, among credit rating agencies, Fitch is also one of the rating agencies that observes very carefully how much the country's debt to GDP is.
That is why the government has repeatedly warned against the rate at which the ratio of national debt to GDP is increasing.
I am telling you that we will come up with countermeasures to ensure fiscal soundness as much as the increase in national debt does not increase rapidly.
We will do our best to ensure that the national credit rating does not change.
This time, in the course of the corona crisis, as far as I know, there were about 190 credit rating downgrade decisions.
By a credit rating agency.
Of course, Korea has not changed its national credit rating by three credit rating agencies so far.
The government will do so by explaining as much as possible, explaining the inevitability of the fiscal role, and explaining the government's efforts for fiscal soundness as much as possible.
Q. Even in the political world, there is a discussion on whether to give 50% or 100% of the disaster subsidy on the premise of the 4th supplement, but the Deputy Prime Minister also answered that there is no room.
Does the Ministry of Equipment have any alternatives for the corona victims and the vulnerable?
A. The fourth supplementary administration is the first to support the damage to the torrential downpour, and the second is to respond to the corona crisis.
I can tell you that there is no shortage of support for damage to the torrential rains, considering the already secured budget and financial resources such as reserves, as I have repeatedly said.
So, at least, there is no extra cost to recover from torrential rain.
In line with the re-proliferation trend of corona patients, the 4th supplementary story is being raised by some.
I can tell you two things.
Currently, we made the third supplementary budget at 35 trillion won.
In the third supplementary administration, we secured several budget projects and financial resources to support the corona crisis.
A large portion of the budget project will continue to be executed in the future.
Since it is organized on the premise that it will be executed by the end of the year, the remaining money and the budget to be executed will be about 8 to 9 trillion more executed.
Among them, 2 trillion won in emergency employment security support is also a budget secured to support the needy in preparation for the spread of coronavirus.
The government is steadily executing the already secured budget for those in need due to the corona crisis.
One variable is whether the trend of the increase or decrease of corona patients and whether the social distancing accordingly will rise to the third stage is a big variable.
If we go to step 3 of social distancing, the impact on the economy will probably be much more serious, so additional judgment is needed as to whether additional financial resources will be spent to support the damage.
So, as for the 4th supplementary administration, it seems that the judgment on the trend of the increase or decrease of corona patients now and whether or not the social distancing stage is raised will be variables.
It seems that we will judge later based on the results.
Q. There is a controversy over the implementation of three-stage distancing.
The economic damage was so severe when the third step was taken, so major developed countries also reflected a lot about it.
There is a question about how much effect the containment measure has, or how serious the economic damage is, so stories such as choosing a way of continuing to live with Corona while keeping an appropriate level of distance rather than containment if possible. I'm doing a lot.
First of all, as the head of the economy, I am curious about your position on the three-stage distance.
A. I think the economic damage will be very severe if the transition to the 3rd stage of social distancing.
The third stage of social distancing we thought was very strict than before, such as banning groups of 10 or more people, so I think it will have a huge impact on the economy.
In that sense, I think the transition to the 3rd step of social distancing is a matter that must be decided through a very in-depth review.
However, because it is both sides of the coin that is close to economic quarantine, it is very important for me to catch quarantine as much as possible, so I cannot unconditionally oppose going to step 3 of social distancing.
Therefore, when such a discussion is held at the quarantine major meeting, we will participate together so that the need for quarantine and the impact on the economy are well balanced and decided.
If I only talk about hope, I think that going to step 3 of social distancing is the most burdensome factor for economic recovery.
Q. The growth rate at the BOK has decreased a lot.
So even in such a situation, do you think positive growth is possible this year?
Will the growth prospects for next year be able to maintain the level we see now?
A. The Bank of Korea lowered its growth forecast this year to -1.3%.
Perhaps, it is thought that this was adjusted because the trend of the global economy and the recent increase and decrease of corona confirmed cases were both reflected.
When the government announced its economic policy direction for the second half of last June, it proposed a goal of preventing so-called negative growth this year with a growth rate of 0.2%.
Overall, this is related to the trend of the increase and decrease of corona19 confirmed cases, so if quarantine is controlled as soon as possible, I think there may be results such as a rebound in the third quarter and prevention of reverse growth.
However, if a new situation emerges, such as the recent increase in the number of coronavirus cases going to the end of the year, efforts to prevent adverse growth within the year are expected to be very difficult.
It is the best possible measure for the government to do the utmost by making every possible effort.
(Photo = Yonhap News)