{"id":2202495,"date":"2023-10-17T08:00:03","date_gmt":"2023-10-16T23:00:03","guid":{"rendered":"https:\/\/koreapro.org\/?p=2202495"},"modified":"2023-10-16T14:10:06","modified_gmt":"2023-10-16T05:10:06","slug":"south-koreas-fuel-tax-aims-at-short-term-relief-spurs-long-term-debt-questions","status":"publish","type":"post","link":"https:\/\/koreapro.org\/2023\/10\/south-koreas-fuel-tax-aims-at-short-term-relief-spurs-long-term-debt-questions\/","title":{"rendered":"South Korea\u2019s fuel tax aims at short-term relief, spurs long-term debt questions"},"content":{"rendered":"<p><span style=\"font-weight: 400;\">South Korea is extending its fuel tax reduction through the end of the year in response to economic concerns sparked by the <\/span><a href=\"https:\/\/koreapro.org\/2023\/10\/what-the-hamas-attacks-against-israel-mean-for-south-korea\/\"><span style=\"font-weight: 400;\">Israel-Hamas conflict<\/span><\/a><span style=\"font-weight: 400;\">, as <\/span><a href=\"https:\/\/www.moef.go.kr\/nw\/nes\/detailNesDtaView.do?searchBbsId1=MOSFBBS_000000000028&amp;searchNttId1=MOSF_000000000066146&amp;menuNo=4010100\"><span style=\"font-weight: 400;\">announced<\/span><\/a><span style=\"font-weight: 400;\"> by Finance Minister Choo Kyung-ho. The extension maintains a 25% discount on gasoline and a 37% reduction on diesel consumption, initially slated to conclude in October. The decision comes amid apprehensions of escalating oil prices, potentially triggering increased volatility in various economic sectors. This initiative is part of broader efforts to control domestic price levels and maintain public economic stability, which include intensified inspections to prevent unwarranted price hikes. This policy response coincides with significant upticks in global oil prices, highlighted by a <\/span><a href=\"https:\/\/www.cnbc.com\/2023\/10\/13\/oil-prices-crude-futures-rise-after-us-tightens-sanctions-on-russia.html\"><span style=\"font-weight: 400;\">more than 5% surge<\/span><\/a><span style=\"font-weight: 400;\"> in U.S. West Texas Intermediate crude and Brent crude futures, marking their most substantial daily increases in more than six months.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">The ongoing conflict in the Middle East presents specific economic risks for South Korea, given its substantial reliance on energy imports, particularly from the Middle East\u2014a region accounting for <\/span><a href=\"https:\/\/koreapro.org\/2023\/10\/south-korea-responds-to-israel-hamas-conflict-with-caution\/\"><span style=\"font-weight: 400;\">67% of its crude oil and 37% of its total gas imports<\/span><\/a><span style=\"font-weight: 400;\">. Although there have been no immediate disruptions in energy supplies, there\u2019s a latent risk of broader conflict implications on Middle Eastern energy production and, consequently, global supplies, considering the region\u2019s substantial share in the worldwide seaborne oil trade.<\/span><\/p>\n<p><b>Why It Matters<\/b><\/p>\n<p><span style=\"font-weight: 400;\">South Korea\u2019s decision to prolong tax cuts on fuel consumption comes when the nation\u2019s debt-to-GDP ratio is projected to approach <\/span><a href=\"https:\/\/world.kbs.co.kr\/service\/news_view.htm?lang=e&amp;Seq_Code=181089\"><span style=\"font-weight: 400;\">58% by 2028<\/span><\/a><span style=\"font-weight: 400;\">, as reported by the IMF. This extension could exacerbate the fiscal challenges highlighted by the recent <\/span><a href=\"https:\/\/koreapro.org\/2023\/10\/south-koreas-rising-national-debt-will-likely-solidify-yoons-fiscal-policy\/\"><span style=\"font-weight: 400;\">escalation in national debt<\/span><\/a><span style=\"font-weight: 400;\">, which exceeded $823.15 billion by the end of Aug. 2023. Reducing tax revenue on fuel might result in further revenue declines for the government, following the already observed 16.5% reduction in tax revenue. Although these measures provide short-term relief to consumers and industries sensitive to fuel prices, they could strain South Korea\u2019s fiscal health by diminishing income streams needed to manage and service the growing national debt.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">The immediate fiscal impact of reduced tax revenues could lead to higher national debt, contributing to an increased debt-to-GDP ratio, especially if GDP growth does not outpace the rate of debt accumulation. While the stimulus effect from lower fuel costs could potentially spur economic activity, thereby fostering GDP growth, this outcome hinges on how sectors respond to lower fuel costs amidst ongoing geopolitical tensions and their impact on global trade and oil prices. Balancing these priorities continues to be a delicate act, especially in the lead-up to the forthcoming parliamentary elections, where fiscal policies are under intense scrutiny.<\/span><\/p>\n<div class=\"content-tags\"><a href=\"https:\/\/koreapro.org\/tag\/business-economy\/\"><span class=\"tag\">Business &amp; Economy<\/span><\/a><a href=\"https:\/\/koreapro.org\/tag\/domestic-politics\/\"><span class=\"tag\">Domestic Politics<\/span><\/a><\/div>","protected":false},"excerpt":{"rendered":"<p>South Korea is extending its fuel tax reduction through the end of the year in response to economic concerns sparked by the Israel-Hamas conflict, as announced by Finance Minister Choo Kyung-ho. The extension maintains a 25% discount on gasoline and a 37% reduction on diesel consumption, initially slated to conclude in October. The decision comes [&hellip;]<\/p>\n","protected":false},"author":10407,"featured_media":2202496,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[30],"tags":[24,27],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v22.8 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>South Korea\u2019s fuel tax aims at short-term relief, spurs long-term debt questions - KOREA PRO<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/koreapro.org\/2023\/10\/south-koreas-fuel-tax-aims-at-short-term-relief-spurs-long-term-debt-questions\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"South Korea\u2019s fuel tax aims at short-term relief, spurs long-term debt questions - KOREA PRO\" \/>\n<meta property=\"og:description\" content=\"South Korea is extending its fuel tax reduction through the end of the year in response to economic concerns sparked by the Israel-Hamas conflict, as announced by Finance Minister Choo Kyung-ho. The extension maintains a 25% discount on gasoline and a 37% reduction on diesel consumption, initially slated to conclude in October. 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