(Bloomberg) — South Korea’s parliament approved a 2023 budget that reflects a more rigorous fiscal approach from the new government as it tries to position the nation to address rising economic risks.
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The 639 trillion won ($499 billion) fiscal blueprint passed Saturday represents efforts by officials under President Yoon Suk Yeol to reduce South Korea’s debt dependence and wean the economy off pandemic-era stimulus.
A relaxation of Covid restrictions has allowed businesses to bounce back with less government support. That’s giving policy makers a chance to pivot to issues ranging from an aging population to slowing economic growth and mounting geopolitical uncertainty.
The economy is expected to decelerate in 2023 due to weaker exports and still-elevated interest rates. The Bank of Korea last month cut its growth forecast for next year to 1.7% from a previous 2.6%.
The National Assembly also passed bills to cut the corporate tax by 1 percentage point in each of the four tax brackets and to delay the introduction of a financial investment income tax by two years, compromising on areas of disagreement between the ruling party and the main opposition.
Greater fiscal prudence dovetails with the BOK’s tightening cycle to restrain inflation. It may also help the won, which has been among the worst-performing currencies in Asia this year as the Federal Reserve amped up its rate hikes.
–With assistance from Sangmi Cha.
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