Deputy Prime Minister Hong Nam-ki said that South Korea’s government debt-to-GDP ratio is likely to exceed 40 percent and a fiscal deficit is likely to increase next year. He also said that this is rather inevitable in view of economic and taxation conditions and the need for fiscal expansion and President Moon Jae-in also is well aware of the inevitability.
South Korea’s government debt-to-GDP ratio topped 30 percent in 2009 and reached 38.2 percent in 2016. Under the circumstances, 40 percent is being thought of as a kind of Maginot Line. This year’s ratio is estimated at 39.4 percent.
“Without additional tax revenues, the ratio is likely to reach 40.2 percent next year,” said the deputy prime minister during a news conference on May 23. He added, “Fiscal expansion will continue in 2020 for economic revitalization, restructuring assistance and future preparedness, and the government will continue to make efforts for better government spending and fiscal innovation so that fiscal soundness can be maintained in the mid to long term.”
“We hope that effects on the national economy and employment, economic participants’ capability to bear, and market acceptability will be taken into account during discussions for minimum wage determination for next year,” he went on to say. The OECD recently pointed out that the minimum wage in South Korea rose too much for the past two years to adversely affect employment and low-skilled workers in particular. Likewise, the IMF recently advised South Korea to keep next year's minimum wage increase below its labor productivity growth, that is, 3 to 4 percent.
The deputy prime minister is going to have investment-related meetings with large corporations in five or six sectors, starting from next month and petrochemical. When it comes to social network rumors about redenomination, he stressed that the possibility is zero and now is not the time to discuss it.