KDI Warns Expansionary Spending Risks Chronic Fiscal Deficits

Contributing sentiments towards policy:

56% : The KDI stated that the basic pension should be reformed to "focus support on vulnerable elderly groups and adjust the eligibility age upward," adding, "It is desirable to enhance expenditure efficiency and expand the tax base."
52% : KDI urges fiscal normalization as national debt nears 50% of GDP, warning of entrenched deficits and need for reforms The Korea Development Institute (KDI), a government-funded research institute, has sounded the alarm over the government's aggressive fiscal spending, including the preparation of a 'super budget' worth 728 trillion Korean won for next year.
45% : Despite the rapid decline in student numbers, the system, which mandates allocating 20.79% of domestic tax revenue (excluding tariffs) to primary and secondary education, has led to persistent criticism that provincial and metropolitan education superintendents are misusing surplus funds for populist policies.
39% : The KDI noted, "Considering the low birthrate trend, it is necessary to reform the local education finance subsidy system to link its scale to the school-age population rather than domestic tax revenue," adding, "Amid expected fiscal burdens due to a weakening tax base from low birthrates and aging, as well as rising welfare expenditures, a rigid tax and fiscal system could further undermine fiscal health." ◇Urgent Structural Reforms Needed to Overcome Fiscal Addiction The KDI emphasized that to raise the current potential growth rate, which remains in the 1% range (the maximum growth achievable without stimulating inflation), "structural reforms must be accelerated" rather than relying solely on fiscal measures.
35% : The KDI points out that merely increasing fiscal spending without addressing structural issues in the Korean economy -- such as low productivity, wasteful welfare programs, and a rigid labor market -- will make it difficult to escape low growth.

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