Opposition-controlled Korean Parliament passes slashed $470 bn budget

South Korea's opposition-controlled National Assembly on Tuesday passed a government budget bill for 2025, slashed from the government's proposal amid resistance from the ruling People Power Party.

The 300-member Parliament voted 183-94 to pass a 673.3 trillion won ($470 billion) budget for next year, which was cut by the main opposition Democratic Party from the government's proposed 677.4 trillion won.

The approved 2025 budget is a 2.5% increase of or 16.7 trillion won more than this year’s budget of 656.6 trillion won.

It was the first time the National Assembly passed a trimmed-down budget without consent from government ministries or between rival parties.

The Democratic Party said the cuts were mostly in-reserve funds for the government, interest costs and funds allocated to the presidential office, prosecutors and auditors for classified operations.

"A swift passage of the bill will help resolve the current unease and crisis," said Democratic Party Leader Lee Jae-myung.

GOVERNMENT EXPECTS SLASHED BUDGET TO HURT ECONOMY

The finance ministry said the budget cut will paralyze basic government functions, hinder responses to external challenges and delay policy measures for small businesses and vulnerable citizens.

A senior Democratic Party lawmaker, however, said the Parliament could prepare an extra budget if additional fiscal measures are needed to support the domestic economy.

Korea's economic growth is expected to slow to 1.9% in 2025 and 1.8% in 2026, after a 2.2% rise this year, according to the Bank of Korea.

ABOLITION OF FINANCIAL INVESTMENT INCOME TAX

On Tuesday, the National Assembly also passed an amendment to the Income Tax Act, which includes the abolition of the financial investment income tax.

However, amendments to the Inheritance and Gift Tax Act proposed by the government and ruling party, which include lowering the inheritance tax’s upper limit to 40% from the current 50% and abolishing the 20% premium for majority shareholders, were rejected by the Democratic Party and other minor opposition parties.

The budget for the initial drilling of the Donghae Yeongil Bay deep-sea gas field, known as the Blue Whale Project, was also slashed to 837 million won from 50.5 billion won.

Analysts said in the absence of a sitting president, however, it would be difficult for the government to draft a supplementary budget.

If a supplementary budget is implemented, it could lead to an increase in the national debt as an extra budget is typically funded by issuing government bonds.

Write to Jae-young Han, Jeong,Sang-Won and Sang-Yong Park at jyhan@hankyung.com

In-Soo Nam edited this article.