The government plans to increase total spending by 12.8% next year and then reduce the growth rate to around 5% by 2030. This strategy focuses on investing in growth drivers during the early part of the administration and managing fiscal balance by slowing spending growth thereafter.
On September 1, the government approved the "2026-2030 National Fiscal Management Plan" during a Cabinet meeting chaired by President Lee Jae-myung.
According to the fiscal management plan, total spending will rise from 727.9 trillion won this year to 1,005.2 trillion won by 2030, with an average annual growth rate of 8.4%.
Next year's total spending is set at 820.9 trillion won, a 12.8% increase from this year. Spending will further increase to 894.6 trillion won in 2028 and 957.4 trillion won in 2029, surpassing 1,000 trillion won for the first time in 2030. The total increase in spending from this year to 2030 will amount to 277.3 trillion won.
The annual spending growth rate will decrease from 12.8% next year to 9% in 2028, 7% in 2029, and 5% in 2030. The government cites the declining trend in potential growth rates and the insufficient distribution of growth benefits to vulnerable groups as reasons for the significant increase in next year's spending.
The plan aims to utilize fiscal resources as early investors and initial demanders in future industries such as artificial intelligence and semiconductors to boost potential growth rates. After solidifying economic recovery, the government intends to reinvest increased tax revenues from growth back into growth drivers, creating a virtuous cycle of fiscal management.
The decision to lower the spending growth rate starting in 2028 stems from uncertainty about the sustainability of tax revenue increases from the semiconductor boom. Jo Yong-beom, Vice Minister of the Ministry of Economy and Finance, stated, "We cannot assume that semiconductor tax revenues will continue," adding that national tax revenue growth is projected to be around 3% starting in 2028.
This medium-term fiscal plan is based on an expected real economic growth rate of 2% through 2030. The government aims to keep the fiscal deficit within 3% of GDP during the president's term and maintain the national debt ratio below 50%.
Mandatory spending is projected to grow from 387.7 trillion won this year to 537.9 trillion won by 2030, with an average annual increase of 8.5%. Discretionary spending is expected to rise from 340.2 trillion won to 467.3 trillion won during the same period, averaging an 8.3% increase.
The growth rate of mandatory spending has increased from the 6.3% projected in last year's medium-term fiscal plan. Park Chang-hwan, Director of Budget Coordination at the Ministry of Economy and Finance, explained that this is due to demographic changes caused by low birth rates and an aging population, leading to increased demand for basic pensions and child allowances.
As social welfare systems expand, the structure where mandatory spending surpasses discretionary spending is becoming more entrenched. Since 2022, mandatory spending has exceeded discretionary spending, with the current ratio being approximately 52 to 48.
* This article has been translated by AI.
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