2023-04-16 15:41:48
[이데일리 최훈길 기자] In the second half of this year, a forecast was raised that an additional revised budget (additional budget) of more than 30 trillion won would be drawn up. This is an observation that takes into account declining tax revenues, economic stagnation, and the general election schedule. As the bond market is expected to fluctuate depending on the size of the issuance of deficit government bonds, the impact is noteworthy.
According to the financial investment industry on the 17th, four securities companies released reports predicting the formation of a supplementary budget one after another in March and April this year. NH Investment & Securities on the 16th of last month, Hi Investment & Securities on the 6th, Shinhan Investment & Securities on the 11th, and DB Financial Investment on the 16th. Choo Kyung-ho, Deputy Prime Minister for Economy and Minister of Strategy and Finance, drew a line on the supplementary budget, but rather, major securities companies bet on the ‘comprehensive supplementary budget’.
The stock market is predicting a supplementary budget because the macroeconomic situation is not favourable. While the performance of major companies in the first quarter was hit by an “earnings shock,” it is known that the Ministry of Strategy and Finance is deeply concerned about the direction of fiscal policy after the second quarter. Inside the Ministry of Strategy and Finance, experts from various fields are already making behind-the-scenes inquiries about the organization of the supplementary budget.
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There are three major points of supplementary budget that the stock market is keeping an eye on. First, it is supplementary content. The scale and timing of the supplementary budget usually appear as news headlines, but the Ministry of Strategy and Finance, which actually organizes and prepares the supplementary budget, starts thinking about what to include in the supplementary budget. Depending on this content, whether or not the additional budget will be added, the scale, and timing will be affected.
A supplementary budget is a change to the budget passed by the National Assembly. Therefore, in order to organize a supplementary budget, the legal requirements must be met. According to the National Finance Act (Article 89), a supplementary budget can be compiled in the event of a large-scale disaster (damage due to natural or social disasters). △Economic recession △Mass unemployment △War or large-scale disaster △It can be organized even in situations where significant changes in internal and external conditions occur.
Regarding this, the securities industry saw that an additional budget was inevitable because of the ‘economic recession’. Kim Myeong-sil, a researcher at HI Investment & Securities, interpreted the background of the supplementary budget as “lack of tax revenue and downward pressure on the economy.” Considering the slump in the stock market and real estate, a decrease in exports for six months in a row, and a contraction in consumption, it is predicted that a trillion-dollar “tax revenue punk” (tax revenue deficit) will be expected.
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The second point is the size of the supplementary budget. Researchers Ahn Jae-gyun and Kang Su-jeong, researchers at Shinhan Investment & Securities, said, “This year’s tax revenue is expected to fall short of about 3.7 trillion won to 20 trillion won compared to the forecast.” predicted. The year 2020, during the Moon Jae-in administration, was a time when the economy was stagnant due to the outbreak of Corona 19.
At that time, the third supplementary budget was organized at 35.3 trillion won. It consists of a tax revenue revision of 11.4 trillion won, an economic stimulus package of 11.3 trillion won, and an employment and social safety net expansion budget of 9.4 trillion won, taking into account the reduction in tax revenue. Shinhan Investment & Securities predicted, “The annual growth rate is expected to be 1%, and there are concerns about the sluggish growth path in the second and third quarters, so the reason for the supplementary budget will increase as we move into the second half.”
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The third point is funding. The supplementary budget is financed by government bonds, excess tax revenue, world surplus, fund surplus, and surplus from the Bank of Korea. This year, as there are concerns about a deficit in tax revenue, it is inevitable to issue deficit government bonds when the supplementary budget is drawn up. In this case, the market will be affected by the size of the deficit government bond issuance.
Moon Hong-cheol, a researcher at DB Financial Investment, said, “The average size of deficit government bonds per supplementary budget since 2003 is 0.35% of GDP (excluding financial crises and corona crises), and deficit government bonds this year are organized at 5 trillion to 10 trillion won. There is a possibility that it will be,” he predicted, “because there will be elections next year (even for deficit government bonds), the supplementary budget will be actively promoted in the National Assembly.”
Researcher Kim Myeong-sil said, “The point of the future interest rate direction is that the supplementary budget and interest rate cuts within the year can accompany it.” do. Afterwards, she predicted, the government’s supplementary budget enforcement will be decided in response to the accumulation of tax revenue shortfalls.”
※Additional revised budget (supplementary budget)= It is a budget modified from the existing budget due to unavoidable reasons in a situation where the annual budget has already been set. The old Finance Act (Article 23) distinguished between the additional budget and the revised budget, but the current National Finance Act encompasses them and marks them as the additional revised budget. The supplementary budget refers to the budget that has increased the main budget, and the revised budget refers to the budget that makes changes within the limit of the main budget.
According to the current National Finance Act (Article 89), the government is responsible for △in the event of a war or large-scale natural disaster △when a major change has occurred or is likely to occur in internal and external conditions such as economic recession, mass unemployment, changes in inter-Korean relations, and economic cooperation △ In accordance with laws and regulations, a supplementary budget may be drawn up when expenditures to be paid by the state occur or increase. Afterwards, the supplementary budget is confirmed through a plenary session of the National Assembly.
The supplementary budget has been organized more than once a year since 2015. The largest supplementary budget ever is the second supplementary budget passed by the National Assembly on May 29, 2022, right after the launch of the Yoon Seok-yeol administration. The size of the supplementary budget alone reached 62 trillion won (central government expenditure of 39 trillion won + local subsidies of 23 trillion won).
The most common supplementary budget in a year was 2020, during the Moon Jae-in administration. In the aftermath of Corona 19, four supplementary budgets were organized at the time, the most in 59 years since 1961.
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