The South Korean government has acknowledged that the ratio of state-run enterprises’ debts to the nation’s GDP is relatively high. This is the first time that the Moon Jae-in administration admitted the seriousness of public enterprises’ debt problems.
According to the Economy & Finance Ministry’s report released on Nov. 1, the ratio of non-financial state-run companies’ debts to Korea’s GDP stood at 23.6% as of 2016, much higher compared with 17.3% in Japan, 11% in Mexico, 8.3% in Australia, 3.6% in Britain and 3.8% in Portugal.
In the report, the ministry said Korea’s debt-related indicators other than the liabilities of state-run corporations are sound, including the government bond yield, the ratio of short-term debts to national debts, and foreigners’ portion in the national debts.
The ministry noted that Korea’s ratio of non-financial state-run companies’ debts to GDP is the highest in the OECD and exceeds its average by about 13 percentage points.
The administration’s acknowledgement of the public corporations’ debt problems has to do with mounting concerns. S&P recently said that South Korean state-run companies’ debts are getting close to 30% of the country’s GDP, threatening its fiscal soundness. The debts of 39 major public corporations are estimated to reach 491.8 trillion won next year and 539 trillion won in 2022. Besides, the pace of debt growth is forecast to accelerate owing to the government’s nuclear phase-out policy and job creation demand.