2012 Budget Centers on Job Creation

While Pursuing Fiscal Balance in 2013

 

 

 

Although the fiscal condition has been improved as Korea successfully rode out the 2008 financial

crisis, the country needs to increase its fiscal soundness with growing external uncertainties.

 

	2007	2008	2009	2010
Fiscal balance (percentage to GDP, %)	0.7	-1.1	-4.1	-1.1
National debt (percentage to GDP, %)	30.7	30.1	33.8	33.4

 

Despite the country’s economic growth of 6.2 percent in 2010 that was higher than the expected 5.8 percent, there is a growing need to create more jobs and secure the livelihoods of vulnerable groups.  In this respect, the 2012 budget centers on creating more jobs and improving the welfare system, while at the same time establishing a basis for achieving a fiscal balance in 2013.

 

 

• Four main focuses of the 2012 budget

 

1. Job creation

The 2012 budget puts first priority on creating jobs and supporting those who want to work but face with difficult situations by providing customized welfare services such as expanded daycare services or visiting carer services, so that the virtuous cycle of work, economic growth, and better welfare systems can take root.

 

2. Better welfare

The 2012 budget focuses on daycare, education, housing, and health care, so it can provide customized welfare services in each stage of people’s lives.  The welfare system will be improved in a way for those who want to work to focus on working by providing the most needed welfare services in each stage of life.

 

3. Stronger domestic demand and development of future growth engines

The 2012 budget puts an emphasis on increasing domestic demand through expanded social overhead capital (SOC) investment including improvement of water quality and through more sophisticated service industries, and on developing future growth engines by nurturing green growth-related industries and cultivating human resources.

 

4. Pursuit of budget balance in 2013

The Korean government will keep the spending increase 3 percentage points less than the revenue increase until the country achieves a budget balance in 2013.  In 2011, the spending increase was 2.6 percentage points less than the revenue increase.

 

 

• Budgets and budget allocation

 

1. Spending

The total spending of budgets and funds in 2012 will be 326.1 trillion won, a 5.5 percent increase from the 2011 spending, but 4.0 percentage points less than the revenue increase of 9.5 percent.

 

<2012 spending>

(trillion won, %)

	2011 budget	Increase from the previous year (%)	2012 budget (bill)	Increase from the previous year (%)
Total spending	309.1	5.5	326.1	5.5
- budgets	216.3	5.4	227.0	4.9
- funds	92.7	6.0	99.1	6.9

 

 

2. Revenue

The total revenue is expected to be 344.1 trillion won in 2012, growing 9.5 percent from 2011.

 

<2012 revenue>

(trillion won, %)

	2011 budget	Increase from the previous year (%)	2012 budget (bill)	Increase from the previous year (%)
Total revenue	314.4	8.1	344.1	9.5
- budgets  (tax revenue)	212.1  (187.6)	8.9    (10.1)	234.5 (205.9)	10.6 (9.7)
- funds	102.2	6.5	109.6	7.2
Total tax revenue as percentage of GDP (%)	19.3	-	19.2	-

 

 

3. Fiscal balance and national debt

The fiscal balance in 2012 is projected to post a deficit of 1.0 percent to GDP, improving 1.0 percent compared with a 2.0 percent deficit in 2011.  The national debt is expected to decrease 2.3 percentage points to 32.8 percent to GDP, down from 35.1 percent in 2011.

 

<2012 fiscal balance and national debt>

(trillion won, %)

	2011 budget	2012 budget (bill)
Consolidated fiscal balance excluding social security funds (Percentage to GDP, %) Consolidated fiscal balance	-25.0  (-2.0)   5.3	-14.3    (-1.0)     18.0
National debt (Percentage to GDP, %)	435.5    (35.1)	448.2    (32.8)

 

4. Balanced budget in 2013

A budget balance is expected to be achieved in 2013.

 

(trillion won, %)

	2011	2012	2013	2014	2015	Annual increase
Total revenue	314.4	344.1	375.7	395.8	415.3	7.2
Total spending	309.1	326.1	341.9	357.5	373.1	4.8
Fiscal balance (Percentage to GDP, %)	-25.0 (-2.0)	-14.3 (-1.0)	0.2 (0.0)	3.1 (0.2)	5.3 (0.3)

 

 

5. Budget allocation

 

(trillion won, %)

	2011 budget(A)	2012 budget bill (B)	Change (B-A)	Change (B/A, %)
R&D	14.9	16.0	1.1	7.3
Industries, SMEs, energy (SMEs)	15.2   (6.0)	15.2 (6.2)	0.1 (0.2)	0.6 (3.1)
SOC (excluding Four Major River Restoration Projects)	24.4 (21.4)	22.6 (22.3)	-1.8   (0.9)	-7.3  (4.5)
Agriculture, fishery, food (agriculture)	17.6 (15.1)	18.1 (15.8)	0.5   (0.7)	2.7 (4.7)
Healthcare, welfare, labor	86.4	92.0	5.6	6.4
Education (government support for local government-run educational institutions)	41.2 (35.3)	45.1 (38.5)	3.9 (3.2)	9.3 (9.1)
Culture, sports, tourism	4.2	4.4	0.2	5.7
Environment	5.8	6.1	0.3	6.3
National defense	31.4	33.2	1.8	5.6
Foreign relations, reunification	3.7	3.9	0.2	8.1
Public order, security	13.7	14.5	0.8	6.5
General public administration (government support for local governments)	52.4   (30.2)	56.6 (33.1)	4.2 (2.9)	8.2 (9.5)
Total budgets	309.1	326.1	17.0	5.5