SEOUL (REUTERS) - South Korean lawmakers ratified early on Wednesday the government's 2014 spending bill of 355.8 trillion won (S$426.96 billion), narrowly avoiding a budget crisis and the risk of undercutting the economy's nascent recovery.
Ratification of the spending bill, representing a 2 per cent increase from 2013 and a slightly reduced version of the government's 357.7 trillion won proposal, was delayed until New Year's Day for the second consecutive year as the ruling Saenuri Party and the main opposition Democratic Party were locked in a bitter conflict over issues such as the reformation of the country's national intelligence agency.
Prolonged gridlock in parliament left the budget bill languishing for weeks and forced lawmakers to rush through the review process, something that has become a yearly ritual of race against time.
Ongoing squabbles delayed the ratification well beyond the parliament's self-imposed deadline of Dec 30.
Had it reached Jan 2 without a ratified spending bill, the government would have needed to operate on an ad-hoc supplementary budget based on 2013's spending on essential functions.
Though the government would have been able to continue operating under such circumstances, roughly 140 trillion won worth of spending planned for the year on key social welfare programmes would have been suspended until a budget is passed.
Contractors and temporary workers for the government would have been let go as well.
Analysts had warned that a prolonged delay in ratifying a spending bill could have undermined growth momentum for Asia's fourth-largest economy. But both parties were reluctant to bear such a political burden ahead of the key June provincial elections.
The government currently expects the economy to grow by 3.9 per cent in 2014, following a projected 2.8 per cent growth in 2013. It plans to spend more of the budget in the first half of the year to ensure that growth momentum is sustained.
Separately, lawmakers also voted to raise the minimum corporate income tax rate for companies with income exceeding 100 billion won to 17 per cent from 16 per cent previously to boost government income. The top personal income tax bracket was lowered to include those who earn more than 150 million won from more than 300 million won previously.