A screen capture of the National Assembly Budget Office’s homepage shows the national debt of South Korea above 800 trillion won as of Saturday. (National Assembly Budget Office)
SEJONG -- South Korea’s national debt has reached the highest level after rising back past 800 trillion won ($717 billion), aggravating concerns over fiscal soundness.
According to calculations from the National Assembly Budget Office, the nation’s sovereign debt was estimated at 800.3 trillion won as of Saturday.
Though the figure inched down below the 800 trillion-won mark in early 2021 after surpassing 800 trillion won for the first time in November 2020, it has broken through the mark recently.
This means debt has increased by more than 20 percent during the Moon Jae-in administration, compared to the end of 2017, when the figure stayed at 660.7 trillion won. President Moon took office in May 2017.
Given that the nation’s nominal gross domestic product posted 1,924.4 trillion won in 2020 according to the Bank of Korea, the ratio of national debt to GDP is estimated to have surpassed the 40 percent mark for the first time to reach an all-time high of 41.5 percent. This is just an arithmetical estimate, though.
The ratio is quite high compared to 36 percent in 2017, 32.6 percent in 2013, 29.8 percent in 2009, 25.9 percent in 2005 and 17.2 percent in 2001, data from the Ministry of Economy and Finance showed.
Further, the figure surged by more than 3 percentage points in about a year from the debt-to-GDP ratio of 37.7 percent (723.2 trillion won in sovereign debt) at the end of 2019.
A core factor for the mounting debt held by the government is due to active fiscal expansion via a series of supplementary budgets since 2017, while a large portion of taxpayers’ money has been poured into job creation, including payouts for unemployed people in their 20s.
But critics have questioned the efficacy of fiscal expansion via increasing debt, pointing to a rapid increase only in nonregular jobs, under which the percentage of temporary workers of total salaried workers far surpassed the average of the Organization for Economic Cooperation and Development.
Relative to all salaried workers in Korea, the portion of temporary workers increased 3.2 percentage points in just one year -- from 21.2 percent in 2018 to 24.4 percent in 2019. A temporary employee refers to a salaried worker whose job has a predetermined termination date.
In 2019 Korea was fourth on the list of OECD countries with the highest percentage of temporary workers -- up from No. 7 a year earlier. Of the OECD’s 37 members, figures for 34 countries were compared.
In addition, despite stimulus packages to boost the economy, the GDP growth stayed at 2 percent in 2019, before COVID-19 hit the nation in January 2020. The 2019 growth rate was the lowest in a decade.
The estimates from the National Assembly Budget Office also suggest that the national debt per capita came to 15.43 million won for a population of 51.84 million.
The figure has surged by more than 2 million won in the three years since February 2018, when the national debt per capita surpassed the 13 million-won mark for the first time.
The figure was 11.59 million won at the end of 2015. This means that an ordinary citizen’s national debt burden has surged by 33 percent, compared to the previous administration.
“Whenever the government issues state bonds for the purpose of reinvigorating the economy, this inevitably causes a surge in national debt and increases the tax burden, which will ultimately be borne by ordinary households,” said a finance-related analyst.
By Kim Yon-se (firstname.lastname@example.org