Facing up to debt reality

Public debt, combining total liabilities of the government and public entities, is expected to top 1,000 trillion won ($850 billion) for the first time this year.

According to the Ministry of Strategy and Finance, public debt totaled 957.3 trillion won at the end of 2014, up 6.5 percent, or 58.6 trillion won, from the previous year.

Public debt against the gross domestic product (GDP) reached 64.5 percent, up 1.6 percentage points from a year earlier.

This translates into a debt of 18.91 million won for every citizen. Considering the government debt issue of 50.1 trillion won, public debt will exceed 1,000 trillion won this year.

Separately, Korean companies have combined debt of 1,300 trillion won and individual households 1,166 trillion won. The country’s entire debt would total 3,500 trillion won, 286 percent above the GDP. What’s more worrisome is the pace of debt growth.

Public debt that totaled 753 trillion won in 2011 ballooned by 204 trillion won in just three years. Central government debt has been increasing by nearly double digits every year. Fiscal debt that was at 11.9 percent against the GDP in 1997 will exceed 40 percent next year.

Household and corporate debt has been growing nearly 10 percent due to the rent crisis and a prolonged economic slowdown. Korea is turning into a debt republic.

Korea has been moving in slow gear and is expected to stay there for some time. Due to a low birthrate and rapidly aging population, social welfare costs will inevitably go up.

The government must do its utmost to rationalize its resources, and yet it reiterates the country’s fiscal and household debt levels are passable compared to other advanced nations. It plans to maintain its stimulus policy next year.

But the policies so far have not helped to strengthen the fundamentals. There are few signs of the debt-financed programs translating into growth in the real economy.

The future generation’s burden is piling up while the country’s economic strength and resilience shrinks. The government must seriously rethink its awareness on debt reality.

JoongAng Ilbo, Dec. 26, Page 30