Debt-to-GDP Ratio Expected to Reach 50% in a Couple of Years
The South Korean government announced a supplementary budget of 15 trillion won along with 19.5 trillion won in COVID-19 relief funds on March 2. That day, Deputy Prime Minister Hong Nam-ki remarked that South Korea’s government debt-to-GDP ratio would reach 50 percent in a couple of years at the current pace of increase.
“This year’s first supplementary budget is likely to raise the ratio to 48.2 percent,” he said, adding, “Although the figure itself is still lower than the OECD average, the pace of increase is definitely worrying.”
The ratio topped 20 percent for the first time and reached 22.4 percent in 2004. Then, it jumped to 39.8 percent through the main budget of 2020 and reached 43.9 percent after that year’s four supplementary budgets.
The deputy prime minister stressed that South Korea is a non-key currency country. “International creditworthiness management is very important for every non-key currency country,” he mentioned, continuing, “As of 2019, the average government debt-to-GDP ratio of key currency countries in the OECD exceeded 100 percent and the average of non-key currency countries was less than 50 percent.” He went on to say, “In addition, it should be noted that South Korea’s fiscal spending might increase particularly rapidly due to its economic growth downtrend, decrease in population and rapid aging.”