"Spending under Lee Jaemyung administration to rise 80 trillion won more than forecast over five years"

Welfare spending underestimated
Warning of fiscal risks from relying on the semiconductor boom

The National Assembly Budget Office has projected that total spending will be about 80 trillion won higher than the government initially expected by 2030, the final year of President Lee Jae-myung's term. Government spending is rising sharply due to the expansion of cash-based welfare policies and the rapid aging of the population, but the increase is attributed to an underestimation of welfare spending in the latter half of the president's term, when the fiscal balance is expected to deteriorate. The Budget Office said efforts to improve the fiscal balance are needed to ensure that spending plans relying on a semiconductor boom do not become a fiscal risk.

Yonhap News Agency

According to the Budget Office's 2026-2030 medium-term fiscal outlook released on November 3, government spending is projected to surge from 756.5 trillion won this year to 1,035.8 trillion won in 2030. The projected annual increases in total spending are 3.4 trillion won this year, 6.4 trillion won in 2027, 14.5 trillion won in 2028, 25 trillion won in 2029, and 30.6 trillion won in 2030.

Most of the increase in total spending stems from higher mandatory welfare spending. The Budget Office forecast that mandatory welfare spending will be 51.9 trillion won higher over the five years through 2030 than the government initially projected. By category, the increases are 22.7 trillion won for public pensions, 15.3 trillion won for social insurance, 12.2 trillion won for public assistance, and 1.7 trillion won for other welfare spending.

The Budget Office said, "This gap stems from the government's relatively low estimates, despite recent trends in the growth of mandatory spending in the welfare sector and policy changes expected from next year onward." The differences between the government's estimates and the Budget Office's estimates were particularly large for the National Pension, employment insurance, and the basic pension, at 21 trillion won, 9.6 trillion won, and 6.4 trillion won, respectively.

Total revenue is also expected to rise by 153.6 trillion won, with tax revenue increasing by 140.3 trillion won. Based on the government's tax revenue reassessment in September, its tax revenue estimate was about 90.5 trillion won lower than the National Assembly's estimate. Even under a current-policy scenario that does not reflect major policy changes, such as next year's budget proposal, tax revenue is projected to increase by 10.4 trillion won.

The Lee Jae-myung administration has set out to boost economic growth by injecting public funds into initiatives such as a sweeping artificial intelligence (AI) transformation, and has raised the increase in discretionary spending over its five-year term to a record 8.3%. This is the largest increase on record and far exceeds the average annual increase of 4.7% over the past decade (2015-2025). Concerns have been raised that, as the population ages rapidly and mandatory spending on items such as the basic pension rises, fewer funds will be available to respond to economic needs. The Budget Office noted, "The government's discretionary spending plan assumes that tax revenue will increase as projected. If that increase falls short of the forecast, the plan could pose a fiscal risk."

Experts also noted that the government has overlooked the risk of structural fiscal deficits by relying on optimistic revenue and expenditure estimates tied to the semiconductor boom and underestimating potential sources of deficits. Kim Woo-cheol, a professor in the Department of Taxation at the University of Seoul, said, "Mandatory spending in the welfare sector, which is strongly linked to demographic changes such as population aging and to macroeconomic conditions, is likely to rise much more steeply than the government's simple linear projections suggest."

According to the Budget Office, the managed fiscal balance is expected to return to a deficit in 2028, with the deficit then widening to 41.8 trillion won in 2028 and 78.3 trillion won in 2029, before reaching 92.1 trillion won in 2030, the final year of the current administration's term, bringing it close to 100 trillion won. The Budget Office said, "The managed fiscal balance is expected to improve next year compared with this year as total revenue increases, but this improvement will be temporary," adding, "Efforts are needed to improve the managed fiscal balance, which is set to deteriorate again in the latter half of the administration's term."

This content was produced with the assistance of AI translation services.