The government has proposed increasing its spending next year by 5.5 percent to 326.1 trillion won ($286.2 billion), prioritizing job creation and fiscal soundness to protect the country’s economy from ongoing debt crises abroad.

The Finance Ministry said the 2012 budget plan will cut the government deficit to 1 percent of gross domestic product from the 2 percent expected for this year.

General welfare took up the single largest slice of the total budget with a record 92 trillion won, or 28.2 percent, followed by 56.6 trillion won on public agencies and 45.3 trillion won on education.

“It is inevitable that our budget would prioritize jobs chiefly to minimize the impact of the global fiscal crisis on the domestic economy,” Finance Minister Bahk Jae-wan told reporters.

“Creating jobs would eventually achieve a virtuous circle of growth and better welfare.”

Under the plan, the government will spend less than it takes in until it achieves a budget balance in 2013 ― the year the Lee Myung-bak administration targeted for making revenues equal expenditures.

The government expects total revenue to increase by 9.5 percent to 344.1 trillion won. 

The ministry said the budget plan assumed the Korean economy would grow 4.5 percent next year, which is lower than Seoul’s 4.8 percent growth outlook. “Scooping out public money during the downturns of 2008 helped revive the economy. Refilling the coffer will complete the recovery,” said Kim Dong-yeon, a senior financial official in charge of budget affairs.

Seoul’s budget for job creation will expand 6.8 percent to 10.1 trillion won. Upon approval from lawmakers, job seekers in their teens and twenties will become eligible for state-run programs divided into four categories: funding for youth startups, high school graduates, culture and service sector jobs.

The government has proposed offering 9.5 trillion won to create 562,000 jobs for the poor, senior citizens and younger people. A 200 billion won fund is to be launched to help young entrepreneurs start businesses.

Spending on research and development will also be raised to 16 trillion won next year from 14.9 trillion won this year. National defense spending will rise by 5.6 percent to 33.2 trillion won to meet the growing need for a strong national defense.

The budget for public infrastructure will be trimmed 7.3 percent from this year to 22.6 trillion won. However, last year’s budget included spending for the four rivers project which is almost finished and does not require major funds in 2012. When this is excluded, the budget for infrastructure next year will be expanded 4.5 percent.

By Cynthia J. Kim (cynthiak@heraldcorp.com)