I. 2016 Budget: Overview and Key Characteristics 
In 2016, the Korean economy is expected to grow by 3.0 percent over the previous year (2.6 percent in 2015) on the back of a slowly recovering global economy and domestic demand gradually picking up thanks to low interest rates and oil prices. The 2016 Budget is characterized by cautiously conservative forecasts for economic growth and tax revenues in contrast to the optimistic outlook of the past. Despite measures to suppress growth in total spending (at 3.0 percent in 2016) at the lowest level since 2010 to ensure that the slowing rise in total revenues (2.4 percent) does not result in further deterioration of the fiscal balance, however, the country’s public debt will nevertheless exceed 40 percent of gross domestic product (GDP) for the first time ever.

II. Analysis of Fiscal Revenue 
In light of current economic conditions, the government’s proposed 2015 tax law revisions are assessed as being set in the right direction. The effects of government financing may be partially limited, however, while the insufficient reform in tax exemption and tax cut laws and the lack of measures to raise tax revenues may hurt fiscal soundness. In 2016, total revenues are forecast at 391.2 trillion won, an increase of 14.9 trillion won over the previous year. This represents a slightly smaller growth rate compared to 2015 as a result of a slowdown in tax revenues (5.6% in 2015 → 4.0% in 2016).

III. Analysis of Fiscal Expenditure 
NABO’s forecast for total expenditure in 2016 stands at 386.5 trillion won (government’s forecast at 386.7 trillion won), an increase of 11.1 trillion won compared to the previous year (375.4 trillion won). The different forecasts are due to a gap in mandatory spending (NABO’s 183.2 trillion won  vs. government’s 183.4 trillion won) as a result of different macroeconomic predictions. Both forecasts use the same figure for discretionary spending (203.3 trillion won). Characteristically, resource allocation was made in such a way that (1) more job-related budget (15.8 trillion won) is appropriated to boost youth employment and buffer the temporary instability in the labor market as a result of labor market reforms; (2) Hallyu (Korean Wave), domestic tourism, and other high value-added service sectors can be fostered with more resources going into the areas of culture, sports, and tourism (6.6 trillion won); and (3) less funding is secured for SOCs (24.8 trillion won → 23.3 trillion won), industries, SMEs, and energy sectors (16.4 trillion won → 16.1 trillion won).

IV. Tasks for Fiscal Management 
NABO forecasts three public debt scenarios. Considering the government’s plan to cut expenditure (as stated in its National Fiscal Management Plan) and its effective ability to restructure spending, the most likely scenario (discretionary spending would increase at an annual average rate of 1.4 percent in 2015-2019) suggests that the country’s public debt would rise to 43.4 percent of GDP in 2019. Thus, in view of keeping public debt to a manageable level, the government should consider such options as robust fiscal rules such as the German structural budget balance rules, a systematic and extensive restructuring of spending through a strategic review at area and sector level, and an expansion of the tax base through an overhaul of the tax system.