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South Korea Healthcare

• South Korea's fiscal deficit has increased significantly in 2024 due to rising expenditure.
• The total expenditure has risen due to increased spending on health care insurance subscribers and welfare programs.
• In addition to the fiscal deficit, South Korea's money supply has also been increasing for the 16th consecutive month.
• The current fiscal situation is reminiscent of the 2008 global financial crisis, but is due to increased government spending rather than a global financial meltdown.

South Korea's fiscal deficit has seen a significant increase during the first nine months of 2024, according to the finance ministry. This increase is partly due to a rise in expenditure, with the managed fiscal balance, a key indicator of fiscal health, showing a deficit of 91.5 trillion won ($65.1 billion) in the January-September period. This figure is up 20.9 trillion won from the same period last year.

The current year's deficit is the third-largest for the cited period, with the shortfall reaching 108.4 trillion won in the first nine months of 2020. The current deficit is nearly in line with the 91.6 trillion won forecast for the year, as outlined in this year's budget. A ministry official, who wished to remain anonymous, stated, Given the ongoing revenue shortfalls, it is likely that the managed fiscal deficit will continue to grow as the year progresses.

The total expenditure has increased by 24.8 trillion won from a year earlier to 492.3 trillion won during the cited period. This increase is due to the government spending more on supporting health care insurance subscribers and welfare programs.

South Korea's Money Supply on the Rise

Total revenue also saw an increase, going up by 3.1 trillion won on-year to 439.4 trillion won over the same period. In addition to the fiscal deficit, South Korea's money supply has also been on the rise. For the 16th consecutive month in September, the money supply increased from a month earlier amid an extended monetary tightening mode, as per the central bank data.

The country's M2, a key gauge of the money supply, stood at 4,070.7 trillion won ($2.89 trillion) in September, up 0.2 percent from the previous month. This figure has been on a constant increase since June 2023. On a year-on-year basis, the money supply advanced 5.9 percent in September, a slight slowdown from a 6.1 percent on-year increase in August. The M2 is a measure of the money supply that counts cash, demand deposits, and other easily convertible financial instruments.

Historical Similarities and Global Economic Shifts

This situation is reminiscent of the 2008 global financial crisis when many countries, including South Korea, faced similar fiscal deficits. The government then had to increase expenditure to stimulate the economy, leading to a significant fiscal deficit. However, unlike the 2008 crisis, the current situation is not a result of a global financial meltdown but rather due to increased government spending on health care and welfare programs.

In the broader economic context, other countries are also experiencing economic shifts. For instance, China's economy grew 4.5 percent year-on-year in the first quarter, after Beijing scrapped its zero-Covid measures late last year. The country's March retail figures were up 10.6 percent on-year, the biggest bounce since June 2021. Industrial production in March climbed 3.9 percent year-on-year.

In the United Kingdom, engine maker Rolls-Royce logged a large 2022 loss on a huge accounting charge linked to foreign exchange contracts, but revenue and operating profit jumped on rising orders. The company posted a net loss of almost £1.3 billion ($1.5 billion), after a profit after tax of £120 million the previous year.