(Yonhap)

South Korea's fiscal deficit is estimated to be sharply smaller than its previous estimate last year on the back of larger-than-expected tax revenue, the finance ministry said Thursday.

The consolidated fiscal balance, a key gauge of fiscal soundness, logged a deficit of 30 trillion won ($25 billion) in 2021, smaller than the government's earlier projection of 90.3 trillion won, according to preliminary data from the Ministry of Economy and Finance.

The improved fiscal health was attributable mainly to an increase in tax revenue and a rise in profits from the operation of the national pension fund, the ministry said.South Korea's tax revenue rose 58.5 trillion won on-year in 2021 amid the economic recovery and rises in housing prices. The country's excess tax revenue came to 61.4 trillion won last year.

The government collected 344.1 trillion won in taxes last year, up from 285.5 trillion won the previous year, according to the ministry. In December last year, the tax revenue increased 2.9 trillion won on-year to 20.7 trillion won.

Tax revenue increased last year after the second consecutive year of its decline. In 2020, tax revenue fell 7.9 trillion won due to the fallout of the COVID-19 pandemic.

For fiscal 2021, the country's total income, including tax revenue, tentatively amounted to 570 trillion won, up from its earlier estimate of 514.6 trillion won. Its gross expenditures gained 50 trillion won on-year to 600 trillion won.

The government plans to unveil confirmed data for last year's total revenue, expenditures and fiscal soundness after it settles the national accounts in April.

South Korea's national debt is expected to further increase this year due to the government's expansionary fiscal spending.

The finance ministry proposed another round of an extra budget of 14 trillion won last month to support pandemic-hit merchants. It will be financed with a debt sale worth 11.3 trillion won.

With the proposed extra budget, the national debt is forecast to reach 1,075.7 trillion won this year and the debt-to-GDP ratio is expected to rise to a record high of 50.1 percent, according to the government's estimate.

The fiscal deficit is expected to reach 68.1 trillion won this year, equivalent to 3.2 percent of the GDP. (Yonhap)