Increase Rate 2nd-highest in OECD
The total national debt of South Korea amounted to 4,685.5 trillion won, more than 240 percent of its current GDP estimate for this year, in the first quarter of this year. Besides, South Korea’s rate of debt increase was the second-highest in the group of 28 OECD member countries. Experts point out that South Korea’s fiscal soundness is deteriorating too fast and the rapid deterioration may result in a financial crisis.
The Korea Economic Research Institute said in its report on Oct. 18 that the national debt is divided into 821 trillion won in government debt, 1,843.2 trillion won in household debt and 2,021.3 trillion won in corporate debt. “At the end of the first quarter, the ratios of the total debt and the three categories to the GDP were 243.7 percent, 42.7 percent, 95.9 percent and 105.1 percent, respectively,” it said, adding, “The total debt-to-GDP ratio was the 19th-highest in the group, slightly lower than the United States’ 264.6 percent and Europe’s 265.7 percent.”
According to the report, South Korea’s total debt-to-GDP ratio increased 25.8 percentage points from 2017 to the first quarter of this year. It is the second-highest in the group, second only to Chile’s 32.5 percentage points. “Increasing mortgage loans, decreasing corporate operating surpluses and fiscal balance deterioration are the main factors that caused the rapid increase,” the institute explained.
“These days, South Korea’s non-financial credit-to-GDP ratios are rising very rapidly and this is worrisome in that South Korea is not a key currency country and its economy is heavily dependent on external factors,” the institute went on to say, continuing, “What are needed now are deregulation for business facilitation, fiscal rule legislation and deleveraging in both the public and private sectors.”