2014 Budget Proposal

Reflects Park Administration Campaign Pledges and Designed to Promote Economic Recovery and Create Jobs

The 2014 budget proposal promotes job creation and the economic recovery while minimizing the burden on the public.

I. The 2014 Budget Proposal

1. Economic and Fiscal Conditions in 2014

The Korean economy is expected to continue to recover owing to the gradually improving global economy and government policies to improve the domestic economy. The Korean economy is forecast to grow 2.7 percent in 2013 and 3.9 percent in 2014.* However, potential anxiety factors, such as increased financial market volatility due to tapering quantitative easing and the possibility of a slowdown in the growth rate of emerging economies, pose a risk to the Korean economy.

*Average 2014 growth rate forecast of major institutions: 3.8-3.9% (OECD, BOK, investment banks, among others)

The outlook for tax revenues continues to be poor due to the economic slowdown, and expenditures will continue to increase as welfare costs continue to rise and the central government continues to provide support to local governments. It is necessary for the government to stimulate the economy by promoting job creation, stimulating investment while maintaining fiscal expenditures at a reasonable level in order to strengthen the economic recovery.

The government will take care of its responsibilities by strategically managing public finances while at the same time taking into account the need to expand middle to long-term fiscal space to prepare for future risks.

2. The 2014 Budget Proposal

The 2014 budget proposal bears in mind the current troublesome tax revenue conditions, emphasizing the role public finance plays in stimulating the economy without hampering Korea’s strong fiscal position.

Total government revenues are expected to drop to 370.7 trillion won, a 0.5 percent decrease from the original 2013 budget, due to a decrease in nontax receipts and a slowdown in the growth rate of national tax revenue. Total government expenditures will rise to 357.7 trillion won, an increase of 4.6 percent compared to the original 2013 budget, in order to promote economic recovery. The government will support the economic recovery by making the most of the increase in total government expenditures in 2014, while holding the deficit in the fiscal balance in line with the 2013 budget.

The fiscal balance as a percentage of GDP is expected to post a deficit of 1.8 percent, the same level as the 2013 final budget. National debt as a percentage of GDP is expected to marginally rise compared to the 2013 final budget due to the poor tax revenue situation.

Please refer to the attached PDF