Korea's 2015 budget expansion sign of economic growth focus

As well as improving public livelihood.

The Korean government's budget proposal for 2015 was recently unveiled, with total expenditures to be boosted by 5.7% to KRW 376trn next year, a faster pace of increase compared to the average of 5.0% in 2011-2014

According to a research report from DBS, net fiscal balance (excluding social security funds) is estimated to post a deficit of KRW 33.6trn in 2015, which will equal 2.1% of GDP, the largest over five years.

The expansion of the 2015 budget underscores the government's primary focus in bolstering economic growth and improving public livelihood.

Here’s more from DBS:

Budget spending on social welfare will increase the most next year, by 8.5%. The share of welfare spending in total budget will rise to a record high of 31%.

Positive impact of the budget should be mainly felt by the household sector and reflected in consumption growth next year.

On the flip side, budget expansion also implies a delay of the fiscal consolidation process and an increase in public debt burdens.

The government's original target of balancing fiscal deficit by 2017 will be pushed back to the end of this decade.

The size of bond sales will increase from KRW 97.5trn this year to a record high of KRW 102.9trn next year, according to the finance ministry. A larger scale of bond supply could exert upward pressures on the long-term yields.

Still, overall liquidity pressures in the financial system should be limited and manageable, taking into account the strong current account surplus, excess savings in the domestic private sector and a loose monetary policy adopted by the central bank.