South Korean government will keep up ultra-loose fiscal posture next year by packaging a budget close to this year’s record-high spending of near 550 trillion won ($463 billion) to pick the country up from a potential recession in a pandemic-battered year and groom new growth oriented towards digital and green economy.

According to sources from the Korean government and ruling Democratic Party on Sunday, the government is devising a budget of around 547 trillion won next year, which would be up 6.8 percent from this year’s original spending plan of 512.3 trillion won.

The record spending scheme for 2020 has been stretched further to 546.9 trillion won through three extra budgets created to protect the country’s economy from the adverse coronavirus influences.

The government is due to release its proposal on 2021 budget around the end of August.

The Moon Jae-in administration has maintained eager stimuli since it began office in May 2017, pushing debt levels to all-time high.

It set out on Korean New Deal initiatives earmarked at 114 trillion won until 2025 to seek new growth momentum through investments in data tech and green energy. It plans to spend 45 trillion won in 2021 and 2022 alone on the New Deal projects.

The economy faces a contraction this year for the first time since the wake of 1997 Asian financial crisis after finishing the first half with a technical recession.

But the government won’t be able to stretch expansion beyond 7 percent, given the rising alarm about fiscal integrity.

After taking account of the three supplementary budgets, this year’s spending would be 16.5 percent higher from 2019. Its annual expenditure, based on original budget amount, had increased 7.1 percent in 2018 and 9.5 percent in 2019. Under past conservative governments over nine years, the annual budget gain averaged 4 to 5 percent.

The debt to GDP ratio is expected to reach 43.5 percent and top 45 percent next year.

By Moon Jae-yong and Cho Jeehyun

[ⓒ Pulse by Maeil Business Newspaper & mk.co.kr, All rights reserved]