Budget To Take Debt/GDP Over 50%

South Korea has proposed a record high budget of KRW 604.4tn for next year as it plans to maintain expansionary fiscal spending to cement the economic recovery and narrow social gaps caused by the pandemic; the budget represents an 8.3% rise from the current year. The government plans to submit the budget proposal to the National Assembly on Friday for approval.

• The finance ministry said it will continue to maintain its expansionary fiscal policy next year to underpin the economic recovery, increase spending on antivirus efforts and tackle deepening income disparity. The budget features plans to spend KRW 31.3tn to help create 2.11 million jobs next year and KRW 18.8tn to enhance up the so called "social safety net". There is also a proposal to spend KRW 1.8tn won to compensate the self-employed for their losses caused by state orders to shut down or suspend business operations over the pandemic.
• To finance the budget South Korea will issue up to KRW 77.6tn, bringing total issuance in 2022 to KRW 167.4tn; this compares to KRW 186.3tn in 2021 and issued KRW 174.5tn in 2020 (it should be noted that 2021 issuance overshot the original target by almost KRW 15tn) The plan will therefore increase the debt/GDP ratio to 50.2% in 2022 from 47.3% in 2021.
• Futures opened higher and have held gains following the announcement, 3-Year up 4 ticks at 110.56, 10-Year up 25 ticks at 128.35. Won is slightly stronger on the session, USD/KRW down 1.10 at 1165.65 but sticking to yesterday's range.