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Title 2018 NABO Medium-Term Fiscal Projection: 2018~2027

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  • Date
    2018-11-01

2018 NABO Medium-Term Fiscal Projection: 2018~2027


Published on 1 November 2018
Published by Estimates and Tax Coordination Division of the Estimates and Tax Analysis Office


In this report, a projection of the fiscal transformation over the next 10 years (2018-2027) is made under the assumption of all government policies included in the 「2019 Budget Plan」, 「2018-2022 National Finance Management Plan」 and the Tax Act Revision.


Total revenues are expected to increase from 463.5 trillion won in 2018 to 670.7 trillion won in 2027 (4.2% annually on average) due to reasons such as changes in economic and social conditions and tax income from the revised Tax Act. Over the same period, total expenditures are expected to increase from 432.7 trillion won to 699.5 trillion won (5.5% annually on average) due to reasons including demographic changes such as low birth rates and aging as well as a rapid increase of mandatory expenditures. The consolidated central government balance is expected to shift from a 30.8 trillion won surplus to a 28.8 trillion deficit during this period because the pace of increases in total expenditure will outpace that of total revenue. The operating fiscal balance deficit is expected to be aggravated, from –11.8 trillion won in 2018 to –57.4 trillion won in 2017. The national debt-to-GDP ratio is expected in increase from 38.2% in 2018 to 46.4% in 2017.


When compared with the baseline projection that does not reflect such policy changes, NABO fiscal projections of 10-year aggregate total revenues are expected to be 6.3 trillion won higher, due to the tax income gap arising from the Tax Act revision. NABO fiscal projections of 10-year aggregate total expenditures are expected to be 153.3 trillion won higher, because of the rapid increase of mandatory expenditures and the different hypothesis applied to the discretionary expenditure projection. The operating fiscal balance is expected to have a wider deficit gap than the baseline (10-year aggregate 152.7 trillion won), and the national debt-to-GDP ratio is expected to be 4.9%p higher than the baseline (41.5%), as of 2027.


When compared with the 5-year (2018-2022) National Finance Management Plan submitted by the government, since NABO has released higher projections of the 2018 total tax revenues and due to the different projections of the tax effects of the Tax Act Revision, the 5-year aggregate total revenues are expected to be 21.8 trillion won higher than the government’s plan. The 5-year aggregate total expenditures are expected to be 23.0 trillion won higher than the government’s plan, due to differences inclusive of the macroeconomic variables and projection models used to estimate the mandatory expenditures related to welfare as well as the difference in the hypotheses of the account balance of local transfer finances. The 5-year aggregate operating fiscal deficit is expected to be 20.9 trillion won lower compared to the government’s plan. The national debt, in terms of volume, is 0.7 trillion won lower than that of the government plan for 2022 (897.8 trillion won), but in terms of its ratio to GDP, it is expected to reach 41.9%, which is 0.3%p higher than the government’s plan (41.6%) due to differences inclusive of the current account GDP forecast.

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