By Kang Seung-woo
Korea’s 2010 fiscal deficit is expected to be far smaller than thought as the strong economic rebound helped the government rake in more tax revenue, the finance ministry said Monday.
Consequently, its national debt was estimated at lower than the government’s forecast of 400 trillion won.
According to the Ministry of Strategy and Finance, the nation’s fiscal deficit was estimated at around 15-20 trillion won for the year, equivalent to less than 2 percent of gross domestic product (GDP).
Seoul had projected the deficit-to-GDP ratio to be 2.7 percent for 2010.
The deficit is based on the fiscal account subject to the government’s management, which excludes social welfare and public fund operations from the consolidated fiscal account that reflects the nation’s total income and expenditure. The figure is regarded as one of the major indicators measuring the health of the economy
“We expected the fiscal deficit to reach 30 trillion won last year but it was much lower than that thanks to a rise in tax revenue due to improving economic conditions,” a ministry official said.
Korea’s economy expanded at an eight-year high of 6.1 percent in 2010, compared with a mere 0.2 percent rise in 2009, mainly thanks to brisk exports, and increased production and facility investments.
National tax income reached 177.7 trillion won last year, up 7.2 trillion won from the government’s original estimate.
The country’s national debt amounted to 392 trillion won as of the end of last year, up from 359.6 trillion won from a year earlier. Earlier, the government forecast that its debt might surpass 400 trillion won.
National debt has nearly quadrupled over the past 10 years from 111.4 trillion won in 2000 to 392 trillion won in 2010.
Despite relatively sound fiscal health last year, the government remains on full alert due to compensation for foot-and-mouth disease and inflation.
The government has spent more than 2 trillion won compensating for the losses from the animal epidemic.
In its efforts to tame increasing inflationary pressure, Seoul is considering cutting taxes and tariffs on key imports, which could result in a decline in tax revenue.