Korea was one of the most successful in recovering from the last global crisis, thanks to the decisive and timely fiscal policy. The risk to the budget soundness is nonethe-less increasing again as the global economy faces risks such as the deteriorating budget balance of the southern European countries. By various fiscal indicators, Korea’s fiscal soundness is considered adequate compared to the other developed countries such as the members of the OECD. Nevertheless, it is necessary to quickly restore the fiscal soundness, considering the risk factors to public finance in the near future, including the sensitivity of the Korean economy to the changes in the global economic environment, the continued increase of welfare spending because of low birth rate and population aging, and the large amount of expenditure necessary in the possible reunification in the Korean peninsula.
In this sense, the present evaluation of the budget plan, which determines the fiscal management plan from 2011 to 2014, marks an important step toward the new period of growth. This collection seeks to support the National Assembly’s evalua-tion of the Seven proposals submitted by the administration, including “2011 Bud-get Plan,” “2010 Tax Reform Proposals,” and “2010-2014 National Fiscal Manage-ment Plan.” The collection presents the legislative branch’s independent view on the economy and total government revenue from 2011 to 2014. It also presents an inde-pendent outlook on total expenditure decomposed as compulsory and non-com-pulsory expenditures, fiscal balance, and government debt for the same period. Fur-thermore, it contains the reports analyzing “2011 Budget Plan,” “2010 Tax Reform Proposals,” “2010-2014 National Fiscal Management Plan,” and “2010-2014 Gov-ernment Debt Management Plan” as well as “2010-2014 Government Guaranteed Debt Management Plan,” “Analysis on the FY 2010-2014 Medium and Long Term Fund Operation Plan,” and “2011 Tax Expenditure Outlook,” which were submitted for the first time according to this year’s revision of the National Public Finance Act.
The main points in this collection are the following. NABO’s outlook on the economy and public finance suggests that the administration’s outlook on the econ-omy might be overly optimistic and that more concrete plans to control the budget is necessary under a more realistic outlook on the economy. In response to the tax reform proposals, NABO makes various notes including the fact that the adminis-tration’s tax revenue projection does not accurately take into account the effects of sunset closure or extension of tax breaks/tax preferences. To restore budget sound-ness as soon as possible, NABO recommends that total expenditure follows NABO’s proposed fiscal rule, which constrains the growth of total expenditure to be “poten-tial growth rate of nominal GDP -2 percent.” Finally, the report contains various suggestions on substantiating the documents prepared by the administration for the National Assembly’s review.
In this sense, the present evaluation of the budget plan, which determines the fiscal management plan from 2011 to 2014, marks an important step toward the new period of growth. This collection seeks to support the National Assembly’s evalua-tion of the Seven proposals submitted by the administration, including “2011 Bud-get Plan,” “2010 Tax Reform Proposals,” and “2010-2014 National Fiscal Manage-ment Plan.” The collection presents the legislative branch’s independent view on the economy and total government revenue from 2011 to 2014. It also presents an inde-pendent outlook on total expenditure decomposed as compulsory and non-com-pulsory expenditures, fiscal balance, and government debt for the same period. Fur-thermore, it contains the reports analyzing “2011 Budget Plan,” “2010 Tax Reform Proposals,” “2010-2014 National Fiscal Management Plan,” and “2010-2014 Gov-ernment Debt Management Plan” as well as “2010-2014 Government Guaranteed Debt Management Plan,” “Analysis on the FY 2010-2014 Medium and Long Term Fund Operation Plan,” and “2011 Tax Expenditure Outlook,” which were submitted for the first time according to this year’s revision of the National Public Finance Act.
The main points in this collection are the following. NABO’s outlook on the economy and public finance suggests that the administration’s outlook on the econ-omy might be overly optimistic and that more concrete plans to control the budget is necessary under a more realistic outlook on the economy. In response to the tax reform proposals, NABO makes various notes including the fact that the adminis-tration’s tax revenue projection does not accurately take into account the effects of sunset closure or extension of tax breaks/tax preferences. To restore budget sound-ness as soon as possible, NABO recommends that total expenditure follows NABO’s proposed fiscal rule, which constrains the growth of total expenditure to be “poten-tial growth rate of nominal GDP -2 percent.” Finally, the report contains various suggestions on substantiating the documents prepared by the administration for the National Assembly’s review.