South Korea’s ruling People Power Party (PPP) and main opposition Democratic Party (DP) reached an agreement on the 2024 budget on Wednesday, planning to convene a plenary session on Dec. 21. The agreed budget sees a reduction of approximately $3.2 billion (4.2 trillion won) from the government’s initial proposal, keeping the national debt and government bond issuance unchanged. Significant increases include $462 million (600 billion won) for research and development (R&D) to support advanced technology research and $231 million (300 billion won) for Saemangeum area projects.

The budget’s passage is set to occur 19 days past the legal deadline (Dec. 2), marking a delay similar to last year. This decision comes after extensive deliberations, with both parties emphasizing the urgent need to address national economic and livelihood concerns. The total expenditure is projected to closely match the government’s original figure of $505.5 billion (656.9 trillion won).

Why It Matters

The bipartisan agreement on South Korea’s 2024 budget, amid the looming parliamentary elections in April, signals a political compromise between the PPP and the DP.

President Yoon Suk-yeol’s original budget proposal, emphasizing fiscal responsibility with the lowest spending hike since 2005, faced pushback from the DP, particularly over the proposal to cut the R&D budget by 16.6%. The DP labeled the move as “reckless.” The decision to boost the R&D budget by $462 million suggests the PPP also came under pressure from the business community and international technology investment trends, like Taiwan’s tax incentives for chip investments and the U.S. CHIPS and Science Act. 

Additionally, the increased budget allocation for Saemangeum projects, after the Finance Ministry’s initial 80% cut at the end of August, reflects political considerations influencing fiscal decisions. The original cut, following the World Scout Jamboree fiasco, provoked strong opposition from North Jeolla Province, a DP stronghold. The subsequent reversal in the budget suggests an acknowledgment of electoral pressures and the need to appease regional constituencies ahead of April’s elections.