Government’s account turns to deficit of 50 trillion won… the largest amount in 11 years
기사입력 : 2021-09-17 09:17
The public sector surplus, which combines the government and public companies, has shrunk to the smallest amount in 11 years last year, when the COVID-19 pandemic directly affected economy. This is due to a significant increase in current transfer payments led by the government such as emergency disaster relief fund to respond to COVID-19 crisis, despite an increase in total income such as social charges including the national pension. In particular, the central government posted a deficit of 73 trillion won, affecting public sector’s overall account balance.
According to the ‘2020 Public Sector Accounts’ released by the Bank of Korea (BOK) on the 16th, the public sector balance posted a deficit of 50.6 trillion won last year. It posted a surplus in 2019, when there was no COVID-19 pandemic, but turned to the deficit in 7 years. It is the largest amount in 11 years since it posted a deficit of 58 trillion won in 2009.
The public sector account balance is the amount of general government and public corporations’ total income minus total expenditure. The total income increased by 4.9 trillion won (0.6%) from the previous year to 883.4 trillion won last year, but total expenditure (934 trillion won) also significantly increased by 70.2 trillion won (8.1%), causing a large-scale deficit. The increase rate of expenditure was the highest in 11 years since 2009 (10.6%), and the increase rate of income was lowest since 2007.
The public sector account balance compared to nominal GDP (Gross Domestic Production) was -2.6%, recording the lowest amount since 2009 (-4.8%). The balance excluding the Social Security Fund was -2.6% compared to the nominal GDP. Compared to the public sector account balance relative to GDP of major countries, Korea’s balance was higher than the U.K. (-12.4%) and Australia (-13.5%), and was the same as Switzerland.
The general government posted a deficit of 44.4 trillion won, down 62.8 trillion won from the previous year. This is the largest amount of deficit since 2007. The deficit rate was also the largest ever compared to the previous year. This is due to a significant increase in in current transfer payments, including emergency disaster relief fund to respond to COVID-19 crisis. Tax revenue such as corporate tax decreased by 300 billion won, but total income (681.9 trillion won) increased by 11.6 trillion won from the previous year as income form social charges such as national pension. However, total expenditure also significantly increased by 74.4 trillion won to 726.1 trillion won, turning into a deficit. The increase rate of the general government's total expenditure was 11.4%, the largest ever since 2009 (13.1%).
The central government also posted a deficit of 72.8 trillion won, the largest since statistics were compiled. Local governments posted a surplus last year, but turned to a deficit of 9.9 trillion won this year. The deficit was the largest ever since 2009 (-14.5 trillion won). This is due to an increase in government spending, including private sector balance transfer, despite the increase in local tax revenues.
The Social Security Fund narrowed the deficit. The account balance of social security funds such as the National Pension Services, the Government Employees Pension Service and the National Health Insurance posted a surplus of 38.3 trillion won.
By Global Economic Reporter Tae-jun Lee ; translate by Gounee Yang