Fiscal alarm grows as lawmakers push through a 728 trillion won budget

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Fiscal alarm grows as lawmakers push through a 728 trillion won budget

Published: 04 Dec. 2025, 00:00

Audio report: written by reporters, read by AI

Bipartisan lawmakers pass the revised budget bill for next year at the National Assembly in Yeouido, western Seoul, on Dec. 2, just within the legal deadline. [NEWS1]

Parliament passed next year’s 728 trillion won ($497 billion) budget on time for the first time in five years, drawing praise for restoring the statutory deadline. The bipartisan deal suggested a rare moment of cooperation after months of confrontation. However, its substance raises doubts about whether the National Assembly can be trusted to safeguard the country’s public finances.

The familiar practice of inserting local projects into the budget appears to have been one factor behind the swift compromise. Lawmakers with influence — including Democratic Party members Moon Jin-seog, Kim Byung-kee and Lee So-young, as well as People Power Party members Song Eon-seog, Yoo Sang-bum and Park Hyeong-su — secured sums as high as 12.5 billion won for their constituencies. Much of it was added at the last minute. Once again, serious national priorities were sidelined while backroom bargaining turned the budget process into a venue for political patronage.

The greater concern is how, in that process, lawmakers cut 206.4 billion won from the government's artificial intelligence (AI) programs. The administration had drafted more than 10 trillion won for AI investment to keep pace with global competition. But with total spending capped, Parliament chose to trim future-oriented programs. The move is difficult to justify in an era when technological strength defines national competitiveness. It also recalls the backlash sparked by the Yoon Suk Yeol administration's decision to sharply reduce funding for research and development — a policy misstep that undercut the country's capacity for innovation. Despite urgent calls to bolster growth engines, lawmakers focused more on protecting their own political interests.

Warnings from major research institutions underscore the risks. The Organisation for Economic Cooperation and Development cautioned that Korea lacks a credible plan to restore fiscal discipline and noted that short-term spending increases could lead to long-term deterioration. Despite economic growth hovering near 1 percent, government outlays could rise 8.1 percent next year. Chronic deficits are financed by issuing more than 100 trillion won in bonds annually. As a result, national debt will exceed 50 percent of the GDP for the first time, and the fiscal deficit is projected to reach the 4 percent range — well above the 3 percent threshold commonly regarded as a warning line in advanced European economies. Korea’s fiscal stability has entered a danger zone.

The Economist projected in its 2026 outlook that a fiscal crisis will erupt among advanced economies next year, naming France as the most vulnerable. If France falters, the spillover could surpass the impact of the 2010 eurozone crisis, with inevitable consequences for Korea. Yet Parliament remained preoccupied with securing political budgets. Lawmakers must recognize that Korea has moved one step closer to having its own fiscal time bomb explode and ensure the funds they approved are used effectively.

This article was originally written in Korean and translated by a bilingual reporter with the help of generative AI tools. It was then edited by a native English-speaking editor. All AI-assisted translations are reviewed and refined by our newsroom.