This study suggests future directions for reforming Korea’s fiscal/budget policies, thereby helping to restore the productivity of the Korean government sector given the recent unfavorable fiscal environment.
An examination into how the national budget has been operated over the last four years since the 1997 foreign exchange crisis reveals that budgets grew at slower rates than previous years, and the consolidated government balance was recorded a surplus of 1.3% of GDP. When taking into consideration government loans and national pension programs, Korea recorded a negative balance except in 2000. Although increased social welfare spending and recent financial restructuring have placed a significant burden on the government’s fiscal operations, the functional categories of consolidated finance expenditure pretty much stayed the same. The share of government spending for economic projects remained at around 25%, a significantly high level compared to advanced economies. The economy-related portion of public expenditure, especially the scope and scale of publicly subsidized projects, should decrease. Spending on public services such as law enforcement, market discipline, research and statistics–gathering, however, needs to increase.
For macro-economic stabilizing policies, although they were necessary during the difficult period following the crisis, maintaining such measures once the economy has stabilized is not justifiable. Fiscal policies, except under certain extreme cases, are not the optimal medium for stabilizing the economy given their extensive time lag between design and implementation. Government fiscal stability requires reducing the likelihood of additional firms going insolvent, and restoring balance in public pension programs. Special attention should be paid to the trend of a simultaneous increase in both national assets and liabilities since the late 90s. Government direct lending, the major reason for this phenomenon, can have a negative mid-to long-term impact on fiscal soundness.
2002년도 국가예산과 정책목표(National budget and policy objectives of 2002)
|Series Title; No||연구보고서|
|Subject Country||South Korea(Asia and Pacific)|
|Subject||Economy < Financial Policy|
|Holding||한국개발연구원; KDI 국제정책대학원|