Korea logs smaller-than-expected fiscal deficit in 2021 on larger tax revenue
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Korea's fiscal deficit is estimated to be sharply smaller than its previous estimate last year on the back of larger-than-expected tax revenue, the finance ministry said Thursday.
The consolidated fiscal balance, a key gauge of fiscal soundness, logged a deficit of 30 trillion won ($25 billion) in 2021, much smaller than the government's earlier projection of 90.3 trillion won, according to preliminary data from the Ministry of Economy and Finance.
The improved fiscal health was attributable mainly to an increase in tax revenue and a rise in profits from the operation of the National Pension Fund, the ministry said.
Korea's tax revenue rose 58.5 trillion won year-on-year in 2021 amid the economic recovery and rises in housing prices. The country's excess tax revenue came to 61.4 trillion won last year.
The government collected 344.1 trillion won in taxes in 2021, up from 285.5 trillion won the previous year, according to the ministry. In December last year, the tax revenue increased 2.9 trillion won to 20.7 trillion won.
Tax revenue increased last year after a second consecutive year of decline ― in 2020, revenue fell 7.9 trillion won due to the fallout of the COVID-19 pandemic.
For fiscal 2021, the country's total income, including tax revenue, tentatively amounted to 570 trillion won, up from its earlier estimate of 514.6 trillion won. Its gross expenditures gained 50 trillion won year-on-year to 600 trillion won.
The government plans to unveil confirmed data for last year's total revenue, expenditures and fiscal soundness after it settles the national accounts in April.
Korea's national debt is expected to further increase this year due to the government's expansionary fiscal spending.
The finance ministry proposed another extra budget of 14 trillion won last month to support pandemic-hit merchants. It will be financed with a debt sale worth 11.3 trillion won.
With the proposed extra budget, the national debt is forecast to reach 1,075.7 trillion won this year and the debt-to-GDP ratio is expected to rise to a record high of 50.1 percent, according to government estimates.
The fiscal deficit is expected to reach 68.1 trillion won this year, equivalent to 3.2 percent of GDP. (Yonhap)