2012-2060 Long Term Fiscal Projections and Analysis includes economic fiscal projections along with fiscal soundness up to 2060, and policy suggestions on improving generational burden. First of all, it is projected that the potential growth rate will remain below 1% to 2060 as a result of reduction in labor input and decrease in private consumption and investment, all of which are due to changes in population structure. Total revenue is expected to fall from 26.1% of GDP in 2012 to 22.1% in 2060, while total expenditure expands from 24.8% in 2012 to 35.4% in 2060 due to accelerated increase in public funds and interest paid on loans. As total expenditure expands faster than total revenue does, there is bound to be a negative impact on fiscal soundness. National debt is expected to rise to 218.6% of GDP in 2060, and it is predicted that the sustainability of public finance will decrease after 2034.
    To preserve fiscal sustainability, public finance must maintain 0.46% of GDP surplus each year after 2034. Policy-wise, tax reforms such as raising V.A.T. must be executed before 2018, at which point Korea’s society will enter the aged phase, and the benefit commencement age of public pension will need to be adjusted upwards by 2025.

Suh Jaeman