If a new government is launched following the early presidential election on June 3, it is expected that changes will occur in the preparation of the budget proposal. Previously, both former President Moon Jae-in and former President Yoon Suk-yeol issued 'additional guidelines for budget preparation' shortly after their elections to reflect key projects in the budget proposal. However, this year's presidential election is on June 3, which leaves limited time until the budget proposal is finalized, indicating potential variables.
◇ Both Moon and Yoon issued the 'additional guidelines for budget preparation'
According to the Ministry of Economy and Finance on the 1st, the budget preparation guidelines are a set of guidelines that each ministry must adhere to or reference when preparing their budgets. They include the government's fiscal operation approach, key investment priorities, and directions for fiscal innovation.
According to Articles 28 to 33 of the National Finance Act, the Ministry of Economy and Finance is required to deliver the budget preparation guidelines to each ministry by the end of March, and each ministry must draft a budget request based on these guidelines and submit it to the ministry by the end of May. After the ministry submits the budget proposal to the National Assembly in September, following deliberation at the Cabinet meeting and presidential approval, the National Assembly will review the proposal in October and November, before voting on it in early December.
According to relevant departments, budget preparation guidelines tend to change based on government policy. Former Presidents Moon Jae-in and Yoon Suk-yeol also respectively announced 'additional guidelines for budget preparation' in their first year in office in 2017 and 2022, including their major pledges and key projects in the budget.
Specifically, President Moon Jae-in, who was elected on May 9, 2017, issued additional budget preparation guidelines just 10 days after taking office. Previously, the Ministry of Economy and Finance sent the '2018 budget preparation guidelines' to ministries in March that year, identifying four key focus areas: ▲job creation ▲responding to the Fourth Industrial Revolution ▲overcoming low birth rates ▲mitigating polarization; however, President Moon requested a budget that maximally reflects the new government's policy tasks, including ▲job creation ▲income-led growth ▲overcoming low birth rates ▲reducing fine dust.
At that time, the Ministry of Economy and Finance also issued a guideline stating, 'Please review all financial projects from scratch and structurally adjust discretionary expenditures by 10%.' This type of expression had not been seen since the global financial crisis in 2008 and 2010.
A similar situation occurred in 2022, when the Moon administration issued budget preparation guidelines in March, but the Yoon Suk-yeol administration changed direction by announcing additional budget preparation guidelines just three days after taking office on May 13.
The Ministry of Economy and Finance presented several examples of major policy tasks for the new government, such as ▲phased increase of the basic pension (from 300,000 won to 400,000 won) ▲establishing youth jump accounts for youth asset formation ▲30,000 dwellings for young people ▲20,000 dwellings near transit areas ▲gradually increasing wages for serving military duties. 'Minimum 10% structural adjustment of discretionary expenditures' was also included in the guidelines.
◇ Outlook for budget revisions after the June 3 presidential election… tightening schedule
There are observations that a similar situation could unfold this year as well. The Ministry of Economy and Finance notified central agencies of the 'guidelines for preparing the budget and fund management plan for 2026' on March 25. At that time, the basic direction for the budget preparation included ▲stabilizing livelihoods and recovering the economy ▲strengthening industrial competitiveness ▲addressing the population crisis and regional extinction risks ▲improving fiscal sustainability and productivity, indicating the influence of the Yoon administration.
However, depending on the election results, this direction could change significantly. The National Assembly Budget Office also noted that 'there is a high possibility that the preparation guidelines will change due to the early presidential election on June 3', mentioning that there were cases in 2023 where budget requests had to be submitted again after June.
If candidate Lee Jae-myung is elected, he is expected to focus on 'basic social' policies such as ▲child allowances ▲basic income for farmers and fishermen ▲local currencies ▲public rental housing. If candidate Kim Moon-soo is elected, policies aimed at improving the corporate investment environment ▲establishing a super metropolitan megacity foundation ▲enhancing housing support are expected to gain traction.
The problem is that the timeline is even tighter this time. The new government is set to take office on June 4, after the budget requests from each ministry are submitted at the end of May. This means that if the new government issues additional guidelines, the time available for each ministry to reflect those guidelines will be even shorter.
Especially if the new government issues a revision policy for the budget requests after holding a fiscal strategy meeting, the situation will become more urgent. The fiscal strategy meeting is a high-level decision-making body in the financial sector where all ministers participate to confirm the budget proposal for the next year and the National Fiscal Management Plan for the next five years.
In this case, the timeline for amending the budget proposal becomes even tighter, as it can only proceed after the confirmation hearings and appointment procedures for the ministerial candidates are completed. Earlier, in the second year of the Yoon administration in 2023, a budget proposal reflecting expenditure reductions was also requested after the fiscal strategy meeting at the end of June, and the deadline for resubmitting the budget proposal given to each ministry was only three days.
A relationship official from the Ministry of Economy and Finance stated, 'The fiscal strategy meeting is usually held in April or May, but this year it is expected to be held around July,' adding, 'Depending on the results of the meeting, the budget preparation guidelines may change.' He also mentioned, 'This year will be a busier budget preparation period than usual from mid-July to early August.'