The South Korean authorities are seeking to increase government spending next year to support the economy, and have pledged to increase financial support for other growing industries such as semiconductors and South Korean pop music (K-Pop) entertainment.
According to the Futu Securities app, the South Korean authorities are seeking to increase government spending next year to support the economy, and have pledged to increase financial support for other growing industries such as semiconductors and South Korean pop music (K-Pop) entertainment.
The South Korean Ministry of Finance said in a statement on Tuesday that the South Korean government plans to spend 677.4 trillion won (equivalent to $512 billion) by 2025, an increase of 3.2% from this year's budget. In comparison, the budget for this year increased by 2.8%.
The South Korean economy is slowing down and fiscal spending is expanding.
The South Korean Ministry of Finance stated that the proposal to be submitted to the National Assembly includes providing low-interest loans of 6.2 trillion won to semiconductor, battery, and biotechnology development companies.
In addition, a fund worth 2.9 trillion won will be established to support South Korean pop music concerts and content creation, promote nuclear energy projects including small modular reactors, and provide guarantees for weapon exports. In recent years, these industries have become the driving force behind South Korea's export-oriented economy.
Trade is the backbone of the South Korean economy as the country relies on the global supply chain for essential goods and raw materials due to a lack of natural resources. So far this year, chips have been leading the export rebound, and South Korean authorities expect this momentum to continue into next year, although the economic growth rate is expected to slow to 2.2%, lower than the 2.6% growth rate in 2024.
At the same time, the Bank of Korea predicts that GDP growth rate will slow from 2.4% this year to 2.1% next year.
South Korea is one of the countries with the smallest government debt burden among developed countries. According to the South Korean Ministry of Finance, if the budget proposal is approved, the proportion of its debt to GDP will increase from 47.4% this year to 48.3% next year. The South Korean government expects this ratio to reach around 50.5% by 2028.
According to data from the International Monetary Fund (IMF), the average debt-to-GDP ratio in East Asia in 2024 is 109.6%, with Japan having the highest ratio at 254.6%.