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Korea's fiscal soundness is rapidly deteriorating, with the government's budget balance suffering the largest deficit in the first half of this year, government data showed, Wednesday.
According to the Ministry of Economy and Finance (MOEF), Korea's consolidated public fiscal balance, which is one of the key barometers measuring national soundness, posted a deficit of 38.5 trillion won ($3.16 billion) between January and June.
This was the worst figure since the ministry has collected related data in 2011.
The ballooning deficit was the result of the government's frontloading of its budget in the first half and lower-than-expected tax revenue amid the economic slowdown.
Consolidated public fiscal balance is the sum of tax revenue and returns from public and social fund management.
"The government has vigorously spent taxpayers' money to revitalize the nation's sluggish economy. It was inevitable for the government to record an all-time high fiscal deficit in the first half of the year," said an MOEF official.
"However, this isn't something we weren't expecting. The value-added and corporate tax are scheduled to be reported soon. We should see further development in government revenue this month."
National tax revenue jumped 2.3 trillion won year-on-year to 246 trillion won in the first half. However, the government spent 284.5 trillion won in the period, which was 37.2 trillion won higher than it originally planned.
Experts said Korea's economy has continued its downward trend in investment and exports due to weakened domestic and overseas consumer confidence, so government spending is inevitable to boost demand.
Yonsei University professor Sung Tae-yoon said government spending is a must under current economic conditions.
"The government spending is aimed at boosting the nation's worsening domestic demand," Sung said. "Further stretch in its fiscal deficit could be an issue, but the spending was a must at the moment. The government should monitor the further development."
NH Investment & Securities Research Division head Lee Chang-mok agreed.
"This isn't the time for austerity measures," Lee said.
"Rather, the government should seek solutions to boost investment and demand."
According to a study released by the Korea Development Institute, Wednesday, a series of external factors, including the renewed U.S.-China trade tension and Tokyo's export curbs on key materials for semiconductors and screens are expanding risks in the future course of Korea's economy.
Adding fuel to the fire, the nation's economy has suffered a prolonged decline in investment and exports for months, the study added.
Korea's exports declined 11 percent in July compared to the previous month, continuing its downward trend. The nation's trade surplus stood at $2.44 billion in July, down $6.89 billion from a year ago.
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