South Korea’s fiscal deficit widened to a record 110.5 trillion won ($93.2 billion) in the first six months of the year after the government sharply upped spending with three extra budgets on top of an already outsized 2020 budget to stimulate the economy and tax revenue sank during the protracted pandemic.

According to a report released by the Ministry of Economy and Finance on Tuesday, fiscal spending in the January-June period surged 31.4 trillion won year over year to 316 trillion won.

The increase was mainly driven by the government’s extraordinary three extra budgets totaling 60 trillion won in total to insulate the ailing economy from the coronavirus. The Korean government also paid out emergency disaster relief funds, employment maintenance subsidies, and job-seeking benefits to battle against COVID-19.

Tax revenue in the first six months of this year, however, lost 20.1 trillion won from the same period a year ago to amount to 226 trillion won. Tax collection rate was 4.8 percentage points lower than the annual target initially set by the government.

With increased spending and reduced income, the government’s consolidated fiscal deficit – total income minus spending – reached to an all-time high of 90 trillion won in the first six months, up from 51.5 trillion won in the same period last year.

When excluding social security funds including pension and employment insurance, the fiscal deficit stretched to 110.5 trillion won in the January-June period, up 51 trillion won from the same period a year ago, and more than double from last year’s total deficit of 54.4 trillion won.

Government debt reached 764.1 trillion won as of the end of June, up 65 trillion won from the the end of December. Government debt ratio is projected to reach 43.5 percent to gross domestic product (GDP) in the end of this year.

Concerns are mounting as the political circle is proposing yet another extra budget to provide recovery support on damage from the deadliest monsoon that has hit Korea in almost a decade.

Lee Hae-chan, leader of ruling Democratic Party on Monday said during the party’s Supreme Council meeting that the party will urgently discuss necessary measures to deal with damage from heavy rainfall such as anther possible supplementary budget or allocation of reserve funds.

Sung Tae-yoon, professor of economy at Yonsei University, expected the county’s fiscal deficit would inevitably continue to expand to an all-time high for a while unless coronavirus miraculously diminishes.

By Lee Ji-yong and Lee Eun-joo

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