Last year, the debt of the central and local governments, non-profit public institutions, and non-financial public enterprises in the public sector reached nearly 1,600 trillion won (US$1.24 trillion), marking a historic high. The debt of non-financial public enterprises such as Korea Electric Power Corporation (KEPCO) surged by over 77 trillion won, surpassing 70% of the gross domestic product (GDP) for the first time.
According to the results of the “2022 Fiscal Year General Government and Public Sector Debt” released by the Ministry of Economy and Finance (MOEF) on Dec. 14, the public sector debt last year increased by 161.4 trillion won compared to the previous year, reaching 1,588.7 trillion won.
The total public sector debt, including both general government debt and non-financial public enterprise debt, serves as a key indicator for assessing the fiscal risk level borne by the government, encompassing all public debts.
The debt-to-GDP ratio reached 73.5%, surpassing 70% for the first time in history. The ratio of public sector debt to GDP slightly decreased from 56.9% in 2017 to 56.8% in 2018 but then rose to 58.9% in 2019. It further increased to 66.0% in 2020 and 68.9% in 2021, and spiked to 73.5% last year, marking a whopping 4.9 percentage point increase over the course of the year. This is the second-largest increase since the beginning of statistical recording. The most significant increase occurred in 2020, driven by substantial spending in response to factors like the COVID-19 pandemic with a 7.2 percentage points rise.
The rapid increase in public sector debt was largely influenced by the sharp rise in the debt of non-financial public enterprises such as KEPCO and Korea Gas Corporation.
Indeed, within public sector debt, the debt of non-financial public enterprises increased by 77.7 trillion won from 439.7 trillion won last year to 517.4 trillion won. Notably, debt from KEPCO and its power subsidiary companies increased by 46.2 trillion won. This significant rise in borrowing by KEPCO and others can be attributed to the substantial increase in costs due to the surge in energy prices last year, which were not adequately reflected in electricity tariffs.
To systematically manage debt, the government has been calculating the national debt (D1) of central and local governments, general government debt (D2), and public sector debt (D3) since the 2011 fiscal year. D2 includes non-profit public institutions in D1, and D3 encompasses non-financial public enterprises in D2, providing a comprehensive measure of debt.
Last year, general government debt increased by 90.9 trillion won to 1,157.2 trillion won, leading the overall growth in the public sector debt. The ratio of general government debt to GDP was 53.5%, showing a 2.2 percentage point increase compared to the previous year.
Especially noteworthy is that the ratio of D2 to GDP last year, which was 53.5%, exceeded the average of 11 non-key currency countries, which was 53.1%, for the first time since the statistics began in 2011. The 11 non-key currency countries refer to nations that do not use key currencies such as the U.S. dollar, Japanese yen, and British pound, based on the International Monetary Fund (IMF) criteria for the 35 advanced economies. This includes countries like South Korea, Singapore, the Czech Republic, Denmark, Hong Kong, Iceland, Israel, Malta, New Zealand, Sweden, and Norway.
Meanwhile, according to the monthly fiscal trends released by the MOEF on the same day, the December issue stated that national debt in October increased by about 6 trillion won compared to the previous month. It surpassed 1,100 trillion won once again, reaching 1,105.5 trillion won.
Furthermore, the total national revenue collected until October this year amounted to 492.5 trillion won, showing a decrease of 45.2 trillion won compared to the same period last year. As a result, it revealed a deficit of 52.2 trillion won.