In the Hole
The debt of the Korean economy (household, corporate, and government) stood at 3.8 quadrillion won (US$3.6 trillion), dwarfing its gross domestic product (GDP) by a factor of 3.
According to the Bank of Korea’s money flow tables on April 2, as of the end of last year the total debts from households, nonprofit organizations, non-financial private companies, and government organizations stood at 3.784 quadrillion won (around US$3.58 trillion).
Therefore, the debt-to-GDP ratio amounted to a whopping 264.9 percent, despite the fact that after applying the new standard, last year’s nominal GDP rose to 1.4283 quadrillion won (US$1.4 trillion).
The ratio would have been much higher if the old barometer had been used to calculate the GDP.
The debt-to-GDP ratio edged up from 2004’s 202.7 percent to 2006’s 222.5 percent, on to 2007’s 229.8 percent, jumped to 2008’s 254.4 percent, and previously ended up at 2012’s 260 percent.
This trend shows that debts owed by economic entities such as the government, corporations, and households swelled at a faster rate than the rate that added value was created.
In fact, last year, the debt of households and nonprofit organizations (1.223 quadrillion won, US$1.16 trillion) ballooned 2.3 times from 10 years ago. Non-financial enterprise debt (company stock and equity shares, direct investment excluded) stood at 206.4 trillion won (US$195 billion), swelling 2.2 times from ten years ago.
In particular, government debt (central and regional, 496.6 trillion won, US$469.3 billion) mounted up 3.4 times, whereas in the same period, the new standard that uses nominal GDP rose only 76.1 percent from 810.9 trillion won to 1.4283 quadrillion won (US$1.35 trillion).