Analysis of the First Installment of a Supplementary Budget Bill for 2020
Published on March 11, 2020
Published by Budget Analysis Division
On March 5, the government sent its “First Installment of a Supplementary Budget Bill for 2020” to the National Assembly. Due to the recent COVID-19 outbreak, anxiety among the citizenry is rising and private economic activities are rapidly contracting. As the public welfare and overall economic situation increasingly burden society, the budget proposal was submitted to minimize the impact of the epidemic and to recover from losses incurred on the people early on.
The 11.7 trillion won supplementary budget bill includes 3.2 trillion won in revised reductions of national tax revenue and 8.5 trillion won in budget expenditures. The government preserved this amount through revision of national tax revenue shortfalls, as it is expected that national tax income will fall short in relation to the COVID-19 spread and further economic slow-down. In addition, it plans to spend 2.3 trillion won to advance the nation’s infectious disease prevention system, 2.4 trillion won to help reinvigorate micro-businesses and SMEs, 3.0 trillion won to bolster public welfare and stabilize employment, and 0.8 trillion won to revitalize stagnant local economies and business districts.
On the other hand, deterioration of fiscal soundness seems inevitable because the funding sources for the supplementary budget will consist of 0.7 trillion won in surplus funds from the Bank of Korea, 0.7 trillion won in excess funds from public fund schemes, and 10.3 trillion won in government bonds to be issued. The national debt is likely to reach 815.5 trillion won, exceeding 40% of GDP, and operational fiscal balance is also expected to show a deficit of 10.5 trillion won from the original 2020 budget. For these reasons, it will be necessary to devise measures that are designed to improve fiscal soundness and efficiency with limited financial resources.
The National Assembly Budget Office published its, “Analysis of the First Installment of a Supplementary Budget Bill for 2020” to support the extensive review of the supplementary budget bill by the National Assembly. This report consists of two chapters: Chapter 1 contains a comprehensive analysis of the requirements to formulate a supplementary budget & financial resources needed, as well as fiscal soundness, the size of revised national tax revenue shortfalls and their economic effects; Chapter 2 contains an in-depth analysis of the urgency, enforceability within the year, effectiveness, and appropriateness of the budget scale for the 42 individual projects organized by a total of eight government ministries.