The combined fiscal deficit of South Korea's government and state-owned enterprises exceeded 83 trillion won last year. The shortfall widened by 14 trillion won from a year earlier, the largest increase since the data series began in 2007. Total spending grew faster than total revenue as current transfers, including consumption vouchers to support household spending, and final consumption expenditure such as national health insurance benefits both increased.
The public sector recorded a deficit of 83.1 trillion won last year, according to the 2025 public sector accounts, a preliminary reading released by the Bank of Korea on the 18th. That compares with a deficit of 69.1 trillion won in 2024, an increase of 14 trillion won.
Total public sector revenue rose 53 trillion won, or 4.7%, from a year earlier to 1,192.1 trillion won, driven by higher tax receipts including corporate and income taxes as well as social contributions such as pension premiums. But total spending climbed 67 trillion won, or 5.5%, to 1,275.2 trillion won, outpacing the revenue gain.
Current transfers and final consumption expenditure led the increase in spending. Current transfers rose on payments of consumption vouchers, while final consumption expenditure, including health insurance benefits, also increased. Even with higher revenue, the faster pace of spending growth worsened the overall public sector balance.
By sector, the general government deficit widened by 2.6 trillion won to 60.1 trillion won from 57.5 trillion won a year earlier. The main driver was the central government deficit, which grew to 90.1 trillion won from 83.8 trillion won. The local government deficit narrowed sharply to 2 trillion won from 15.5 trillion won, but that was not enough to offset the wider central government shortfall.
Social security funds, including the National Pension Service, stayed in surplus, but the surplus shrank by 9.8 trillion won to 32 trillion won from 41.8 trillion won.
Fiscal pressure also mounted at state-owned enterprises. At non-financial state-owned enterprises, intermediate consumption fell on lower raw material prices, but the deficit widened by 5.4 trillion won to 22.1 trillion won from 16.7 trillion won as investment expanded, including public housing construction and purchases of rental housing.
Financial state-owned enterprises swung to a deficit from a surplus. Falling interest rates cut interest income, turning a 5.1 trillion won surplus in 2024 into a 900 billion won deficit last year.
The public sector balance as a share of nominal gross domestic product also deteriorated. The ratio stood at minus 3.1% last year, down 0.4 percentage points from minus 2.7% a year earlier. Among countries used for international comparison, Korea fared better than Britain at minus 5.7% but lagged nations that posted surpluses, such as Switzerland at 0.5% and Denmark.
