SEOUL, September 11 (AJP) - South Korea's fiscal deficit thinned to a five-year low as of July as chip-driven corporate earnings and bigger employee bonuses along with brisk property and stock-market activity swelled tax receipts.
The managed fiscal balance, a gauge of the government's underlying fiscal position that excludes social security funds, posted a deficit of 64.8 trillion won ($48.1 billion) in the January-July period, narrowing by 22 trillion won from an 86.8 trillion won shortfall a year earlier, according to the Ministry of Planning and Budget's September Monthly Public Finance report released Friday.
The deficit was the smallest for the first seven months of a year since 2021, when it stood at 56.9 trillion won.
Government revenue stretched 71.1 trillion won from a year earlier to 456.1 trillion won, substantially outpacing a 33.7 trillion won increase in expenditure to 476.2 trillion won. Tax revenue accounted for the bulk of the improvement, rising 41.4 trillion won to 274.0 trillion won.
The improvement comes as South Korea's chip-driven earnings boom increasingly feeds through to corporate and household income while buoyant property and equity markets generate additional tax revenue.
The ministry attributed a 12.2 trillion won increase in income-tax receipts to higher earned-income taxes following an increase in performance bonuses and stronger capital-gains tax revenue as property transactions increased.
Corporate tax revenue rose 4.4 trillion won as company earnings improved. South Korea's semiconductor makers have been at the forefront of the earnings recovery, benefiting from soaring memory-chip prices and demand linked to artificial intelligence.
Value-added tax receipts increased 8.1 trillion won, helped by stronger private consumption and higher imports.
Asset-market activity delivered an additional boost to the government's coffers.
Securities transaction tax revenue jumped 6.4 trillion won on heavier trading and the restoration of tax rates. The rate returned this year to 0.05 percent for KOSPI transactions and 0.20 percent for KOSDAQ trades after reductions in previous years.
Revenue from the special tax for rural areas rose 8.5 trillion won, with the ministry citing increased KOSPI trading turnover.
Total revenue also received support outside conventional taxes. Non-tax revenue rose 9 trillion won to 30.1 trillion won, while fund revenue increased 20.7 trillion won to 152.0 trillion won.
The consolidated fiscal balance, which subtracts total spending from total revenue before excluding social security funds, posted a 20.1 trillion won deficit, improving by 37.4 trillion won from a 57.5 trillion won shortfall a year earlier. Social security funds recorded a 44.7 trillion won surplus.
The government spending accelerated in line with the revenue growth. Government spending totaled 476.2 trillion won through July, up from 442.5 trillion won a year earlier.
Government debt also continued to climb. Central government debt reached 1,354.2 trillion won at the end of July, up 15.7 trillion won from June and 86.1 trillion won from the end of 2025. Sovereign debt accounted for most of the increase.
The government issued 21.2 trillion won of treasury bonds in August, bringing issuance for the first eight months to 162.3 trillion won, or 72.6 percent of the annual issuance ceiling.
Foreign investors' holdings of Korean government bonds bonds fell by 3.4 trillion won during August to 323.3 trillion won.
AJP Takeaways
- Korea's managed fiscal deficit narrowed to 64.8 trillion won through July, the smallest January-July shortfall since 2021, as revenue grew more than twice as fast as spending.
- Tax receipts jumped 41.4 trillion won to 274 trillion won, helped by stronger corporate earnings and bonuses alongside increased property transactions and stock trading.
- Fiscal improvement has not stopped debt from rising, with central government debt reaching 1,354.2 trillion won at the end of July.
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