2013 and Following Medium Term Economic Outlook and Fiscal Analysis: Comprehensive Review, which provides economic outlooks and directions of fiscal management until 2016, comprehensively summarizes major topics covered throughout the five different reports: “2013 and Following Medium Term Economic Outlook,” “Analysis on Tax Revision Bill 2012,” “Analysis on 2013 Tax Revenue Budget Proposal and Forecast of Following Medium Term Total Tax Revenue,” “Analysis on 2013 and Following Medium Term Fiscal Management,” and “Analysis on 2013 Tax Expenditure Budget Proposal.”
Briefly summarizing the comprehensive review, NABO forecasts that Korea's economy will grow 2.5% in 2012 and 3.5% in 2013. In addition, according to NABO's medium term expectation, Korea's average growth rate for the following years is expected to be 3.5%, which does not fully reach the estimated potential growth rate of 3.7%. NABO estimates total revenue in 2013 will be 13.6 trillion won less than the Administration's figure included in the budget bill proposed. This difference is due to different national tax estimates and sales of government shares estimates derived from different expectations the Administration and NABO have on the economic growth rate. 2013 Total expenditure estimated by NABO is also 0.1 trillion won greater than that of the budget bill. Therefore, the managed fiscal balance, NABO suggests, would have 13.7 trillion won greater deficit than the budget bill's. Moreover, in the following medium term, managed fiscal balance would have deficits about 20 trillion won each year. The government debt to GDP ratio would also increase slightly to 35.9% in 2016.
Since Korea is vulnerable to external shock and is expected to have greater budget expenditures in the future, securing fiscal soundness and building appropriate fiscal policies are necessary. The Administration has prepared a tight budget bill for the next year (FI: -0.81). However, loosening the tight budget is suggested, considering the economic conditions of next year.
Suh Jaeman
Briefly summarizing the comprehensive review, NABO forecasts that Korea's economy will grow 2.5% in 2012 and 3.5% in 2013. In addition, according to NABO's medium term expectation, Korea's average growth rate for the following years is expected to be 3.5%, which does not fully reach the estimated potential growth rate of 3.7%. NABO estimates total revenue in 2013 will be 13.6 trillion won less than the Administration's figure included in the budget bill proposed. This difference is due to different national tax estimates and sales of government shares estimates derived from different expectations the Administration and NABO have on the economic growth rate. 2013 Total expenditure estimated by NABO is also 0.1 trillion won greater than that of the budget bill. Therefore, the managed fiscal balance, NABO suggests, would have 13.7 trillion won greater deficit than the budget bill's. Moreover, in the following medium term, managed fiscal balance would have deficits about 20 trillion won each year. The government debt to GDP ratio would also increase slightly to 35.9% in 2016.
Since Korea is vulnerable to external shock and is expected to have greater budget expenditures in the future, securing fiscal soundness and building appropriate fiscal policies are necessary. The Administration has prepared a tight budget bill for the next year (FI: -0.81). However, loosening the tight budget is suggested, considering the economic conditions of next year.
Suh Jaeman