1. Economic impact of falling oil price
The international oil price plunged recently from 105.6 dollars on June 2, 2014 to 44.82 dollars on January 20, 2015 based on Dubai crude oil price. The reason for the drastic fall on the supply side is found to be the expanded oil supply by non-OPEC countries and increased production by OPEC countries. On the demand side, the sluggish economies of the developed world including European countries and Japan etc., and slowdown of China's growth momentum has slowed down the growth of oil demand. In 2015, the international oil price is most likely to maintain the current level (50 dollar-range by barrel of Dubai crude oil) or gradually pick up in the second half.
Low oil price has positive impact on the Korean economy in terms of cost as it leads to lower price drop and lower interest rates. An empirical analysis of the impact oil price drop's on prices/interest rates using GVAR (Global Vector Autoregression) model showed that the real GDP will increase and the prices and interest rates fall. As Korea depends 100% of oil on imports, lower oil price means lower production cost for companies using petroleum products and increased purchasing power of households and governments who are consumers of petroleum products. A 10% drop of oil price is expected to lower the production cost of the overall industries by 0.67%, manufacturing industry by 1.04% and service industry by 0.28%. 
Although oil-related tax revenue accounts for a significant portion of the national tax with 14%, the recent low oil price is not expected to have positive impact on oil-related tax revenue. It is because while it is price elasticity of oil consumption that decides increase or decrease of tax revenue when international oil price fluctuates, and the increase of oil imports and consumption did not increase as much as the oil price dropped. 
 
2. Characteristics of economic growth in 2014
While the economic growth rate in 2014 was 3.3% which was slightly higher than that of 2013 (3.0%), it has not shown significant rebound. Among the 4 times of economic expansion cycles since 2000, this time of cycle shows the slowest recovery trend. The contents of growth is not as sound with contribution to growth by domestic demand and net export declined. While sluggish domestic demand continued due to structural issues including households's debt burden etc., the recovery expectation of companies have improved with increased contribution of inventories and capital investments. The total export growth rate has slowed down from 4.3% in 2013 to 2.8% in 2014 due to sluggish export to Asian countries and decrease of transit trade margin.

3. The settlement result of total tax 2014 fiscal year
The total tax revenue of the 2014 fiscal year (general accounting + special accounting) is 298.7 trillion won which falls short by 11.0 trillion won of the budget of 309.7 trillion won. The national tax revenue is 205.5 trillion won, short by 10.9 trillion of the budget of 216.5 trillion won but increased by 3.6 trillion won from 201.9 trillion won in the previous year.  Sluggish tax revenue is attributable to aggravated business performance, sluggish domestic demand and stock market caused by economic slowdown, decreased corporate tax due to falling foreign exchange rate etc., and decreased tariff and VAT etc.
The national tax revenue in 2015 is more likely to be below the existing forecast (October, 2014), considering downward revision of macro-economic outlook of 2015 and sluggish performance in 2014.

Budget Analysis Office