NABO Economic Trends & Issues (No. 134)

Published on March 20, 2025
Published by Macro-Economic AnalysisDivision

■ Economic Trends
   Amid ongoing internal and external uncertainties, the Korean economy is facing growing downward pressure as sluggish domestic demand persists and exports slow faster than expected.
    In January, production continued to decline in both the manufacturing and service sectors, while the composite economic index saw drops in the coincident and leading indices. Retail sales fell 0.6% MoM, mainly due to weaker sales of semi-durable and non-durable goods. Facility investment declined by 14.2% MoM as machinery and transportation equipment remained sluggish, while the value of completed construction fell 4.3% MoM due to downturns in building construction and civil engineering. In November, the central government’s cumulative fiscal spending increased by KRW 19.1 trillion. In February, the trade balance surplus widened compared to the previous month to USD 4.3 billion, although export growth slowed significantly. Meanwhile, consumer prices rose 2.0% YoY, showing a slight slowdown from the previous month.
   In February, the spread between the interest rate on two-year government bonds and the base rate narrowed from the previous month to 14 basis points. The KOSPI index inched up to 2,532.8 at the end of February, while household loans continued to rise in December, driven mainly by mortgage loans. The housing transaction price index fell 0.1% MoM in January, accompanied by a decline in the number of housing transactions. In December, corporate loans decreased by KRW 9.5 trillion MoM, while stock and corporate bond issuance rose 28.5% MoM in January. The USD/KRW exchange rate in February increased from the previous month to 1,463.4, although volatility has been decreasing. Meanwhile, foreign reserves declined to USD 409.2 billion in December.

■ Economic Issue Analysis: Linking Central Government Fiscal Expenditure and National Income Statistics
   With increasing downward pressure on economic growth, there is growing recognition of the need for countermeasures such as a supplementary budget. However, the significant discrepancy between central government finances and national income statistics poses a challenge in analyzing the economic impact of fiscal measures such as supplementary budgets. This analysis examined ways to bridge the gap between integrated fiscal data and national income statistics by using government settlement data recorded in the Digital Budget and Accounting System (dBrain).
   The analysis using the national income approach to government fiscal expenditure found that central government spending fluctuates mainly due to transfer expenditures. This indicates that local government grants and subsidies are primarily used for spending adjustments, including supplementary budgets. Given that the economic ripple effects of supplementary budgets and other fiscal measures may vary depending on the spending route, it is essential to make consistent efforts to accurately and comprehensively understand each channel of fiscal expenditure.