Gov’t debt exceeded 50% of GDP in 2022

[Image source: Gettyimagesbank]

South Korea’s government debt was over half of the nation’s gross domestic product (GDP) in 2022, for a total of nearly 1,200 trillion won ($928 billion). The government debt-to-GDP ratio was higher than the average of 11 countries with non-major currencies for the first time since the compilation of related statistics began in 2011.

According to the Ministry of Economy and Finance on Thursday, Korea’s general government debt hit 1,157.2 trillion won in 2022, an increase of 90.9 trillion won from the previous year, and the government debt-to-GDP ratio rose to 53.5 percent, up by 2.2 percentage points from the previous year. The commonly used debt statistics include national debt, which encompasses the debt figures of the central and local governments, and general government debt, the sum of the national debt and the debt of 346 non-profit public organizations nationwide.

The sharp increase in general government debt last year was largely due to government bond issuance, which increased by 84.3 trillion won. The issuance, which was primarily for the purpose of deficit coverage, and the sale of 2.8 trillion won worth of government bonds held by major pension funds also contributed to the increase in general government debt. Borrowings decreased by a total of 1.1 trillion won, with subscription savings for housing and urban funds reduced by 700 billion won.

The general government debt ratio of 11 countries with non-major currencies averaged 53.1 percent last year, according to the International Monetary Fund, with Korea’s debt ratio 0.4 percentage points higher than the 11-country average. This is the first time since the start of statistical compilation in 2011 that the nation’s debt ratio has exceeded the average of those countries with non-key currencies.

General government debt significantly increased during the previous Moon Jae-in administration, with the general government debt standing at 759.7 trillion won and a debt ratio of just 40 percent in 2018. Over the Moon administration’s four-year tenure, general government debt increased by 397.5 trillion won and the debt ratio rose by 13.5 percentage points. The impact of the Covid-19 pandemic in 2020 saw a peak in the general government debt ratio with a 6.6 percentage point increase, followed by a 2.6 percentage point decrease in 2021. The current Yoon Suk Yeol administration further reduced the increase in the debt ratio to 2.2 percentage points in 2022. “While other countries have been reducing their debt ratios, we have continued expansionary fiscal policies,” an official from the Ministry of Economy and Finance said.