The central government budget has generally expanded, both in real terms and as a proportion of real GNP, since the end of the Korean War, stabilizing at between 20 and 21 percent of GNP during most of the 1980s. Government spending in South Korea has been less than that for most countries in the world (excepting the other rapidly growing Asian economies of Japan, Taiwan, and Singapore). The share of government spending devoted to investment and other capital formation activities increased steadily through the periods of the first and second five-year plans (1962-1971), peaking at more than 41 percent of the budget in 1969. Since 1971 investment expenditures have remained at less than 30 percent of the budget, while the share of the budget occupied by direct government consumption and transfer payments has continued to increase, averaging more than 70 percent during the 1980s.

During the 1980s, the largest areas of government expenditure were economic services (including infrastructural projects and research and development), national defense, and education. Economic expenditures averaged several percentage points higher than defense expenditures, which remained stable at about 22 to 23 percent of the budget (about 6 percent of GNP) during the decade. In 1990 the government was studying plans to lower defense expenditures to 5 percent of GNP. Some observers noted a trend toward a slight increase in the portion of the budget devoted to social spending during the 1980s. In 1987 expenditures for social services--including health, housing, and welfare--were 16.4 percent of the budget, up from 13.9 percent in 1980, and slightly higher than 1987 government outlays for education (see table 3, Appendix).

The government revenue structure was virtually totally dependent on taxes (see table 4, Appendix). By the early 1980s, nearly two-thirds of tax money was collected in the form of indirect taxes. Revenues collected by the central government in 1987 rose to 19,270.3 billion won (for value of the won--see Glossary), up from 13.197.5 billion won in 1984.

Data as of June 1990