By Lee Hyo-sik
Staff Reporter
The government plans to increase its spending by 2.5 percent next year to finance more research and development (R&D), and other projects designed to promote "low-carbon and green growth," and strengthen the nation's growth potential.
Contrary to the widely held perception that President Lee Myung-bak would slash the welfare budget, its social security-related spending will reach an all-time high.
The national debt is projected to exceed 400 trillion won by the end of 2010 for the first time in history as the government continues expansionary fiscal policies to prop up the troubled economy.
The Ministry of Strategy and Finance said Monday that the 2010 fiscal expenditure, including state-run funds, will total 291.8 trillion won ($246 billion), up 2.5 percent from this year.
It will spend 10.5 percent more next year to support R&D activities, while increasing the social welfare-related budget by nearly 9 percent.
But the 291.8 trillion won expenditure is 3.3 percent less than this year's total spending of 301.8 trillion won, which includes a 17.3-trillion-won supplementary budget introduced in April. It was designed to help Asia's fourth-largest economy rebound from the worst economic slump in more than a decade.
The plan was approved by the Cabinet on Monday and will be forwarded to the National Assembly for passage.
The ministry projected that state revenues from tax and fund operations will drop 1.1 percent to 287.8 trillion won next year, with the 2010 fiscal deficit expected to reach 32 trillion won, up from 24.8 trillion won this year.
The revenue estimate is based on a projection that the nation's gross domestic product (GDP) will grow by 4 percent in 2010. The government plans to issue state bonds worth 30.9 trillion won next year, down from 35.5 trillion won this year.
Additionally, national debt will total 407.1 trillion won in 2010, up sharply from this year's 366 trillion won. It will account for 36.9 percent of GDP, up from this year's 35.6 percent.
"Next year's budget is largely designed to help facilitate the ongoing economic recovery, while allocating more resources to R&D and other activities to enhance growth potential and achieve sustainable growth in the long run.
"At the same time, we will continue to pay attention to supporting small enterprises and low-income earners," Strategy and Finance Minister Yoon Jeung-hyun said. He stressed the government will make every effort to improve its fiscal soundness as quickly as possible.
By sector, the government plans to spend 13.6 trillion won to finance an array of R&D investments in 2010, up 10.5 percent from this year, while welfare-related expenditure will increase 8.6 percent to 81 trillion won.
The government will pour 37.8 trillion won into the education sector, down 1.2 percent from 2009, while expanding the nation's social and economic infrastructure by investing 24.8 trillion won, up 0.3 percent. Military-related fiscal spending will amount to 29.6 trillion won next year, up 3.8 percent from a year earlier.
Foreign affairs and North Korea-related spending will jump 14.7 percent to 3.4 trillion won as the government plans to make a greater financial contribution to international organizations and provide more official development aid (ODA) to developing economies.