SEJONG, SOUTH KOREA (Reuters) - South Korea's government unveiled a 357.7 trillion won ($332 billion) spending proposal for 2014 and said President Park Geun-hye's administration no longer expects to balance the budget within its five-year term as relatively weak economic growth weighs on revenue.
Following are the highlights of the government's budget proposal to be submitted to parliament next month, summarized by Reuters based on statements and briefings from the Ministry of Strategy and Finance:
SPENDING, REVENUE AND ECONOMIC PROJECTIONS:
- The government's proposal calls for 357.7 trillion won worth of fiscal spending next year, up 2.5 percent from projected spending for 2013.
- The finance ministry projects 370.7 trillion won in total income for 2014, up 2.8 percent from the projected income for 2013.
- The government budget forecasts 3.9 percent economic growth next year, marginally lower than the 4.0 percent growth tipped in June.
- Between 2013 and 2017, the finance ministry forecasts average annual growth of 4 percent. It projects average annual government income growth of 5 percent for the five-year period but will keep expenditure growth at an annual average of 3.5 percent to reduce debt.
- South Korean government's fiscal deficit is projected to be 1.8 percent of annual gross domestic product (GDP) next year, unchanged from 2013.
- The finance ministry says the government aims to reduce the fiscal deficit to 0.4 percent of GDP by 2017, the last full year of President Park's five-year term that ends in February 2018. Park previously sought to balance the budget before she leaves office.
- Total sovereign debt is projected to rise to 36.5 percent of GDP, or 515.2 trillion won, in 2014. The finance ministry projects total sovereign debt to be 36.2 percent of GDP, or 480.3 trillion won, for 2013. The Park administration aims to reduce the sovereign debt to 35.6 percent of GDP by 2017.
- The government's proposal seeks 105.9 trillion won in expenditures related to health care, social welfare and employment next year from 99.3 trillion won in 2013. This represents a 6.7 percent rise, the biggest increase for any spending category in the government budget.
- The government plans a subsidy program providing monthly payments of between 100,000 won and 200,000 won to South Koreans aged 65 or older who fall below the top 30 percent in terms of income. President Park had pledged to pay 200,000 won in monthly subsidies to all Koreans aged 65 or older during her election campaign last year.
- The 2014 budget proposal includes 732.8 billion won in appropriations for the defense ministry's tender for next-generation fighter jets, which is up in the air after voting down the only qualifying bid, from Boeing
BOND ISSUANCE PLANS
- The finance ministry plans to sell up to 98 trillion won worth of treasury bonds in 2014, up from 88.4 trillion won set for 2013.
- 55.3 trillion won worth of bonds to be sold next year will repay maturing debt, while another 4 trillion won worth of bonds will be sold to ensure market liquidity. The rest will be deficit bonds.
- The finance ministry plans to sell up to 18 trillion won worth of won-denominated foreign exchange stabilization bonds next year, unchanged from 2013. The bonds are used to fund foreign exchange intervention in markets.
- The government also plans to sell up to $2.5 billion worth of non-won denominated bonds next year, up from $1 billion sold earlier this month, to repay maturing non-won denominated debt.
- Finance Minister Hyun Oh-seok reiterated at an embargoed briefing on Tuesday that the government opposes raising tax rates, as such a move would further undercut growth. He said the government must exhaust all other means, such as eliminating tax exemptions and reducing the size of the country's underground economy, before contemplating tax hikes.
- Vice Finance Minister Lee Suk-joon told reporters at an embargoed briefing on Tuesday that it is highly unlikely the government will draft another supplementary budget next year, citing improving economic momentum.
($1 = 1077.2500 Korean won)
(Reporting by Se Young Lee; Editing by Eric Meijer)
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