Korea’s national debt rising at a fast pace

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Korea’s national debt rising at a fast pace

Korean government debt is low, but it is rising unusually rapidly, according to research by a private think tank.

The Korea Economic Research Institute (KERI) said Monday that it analyzed data from the Bank for International Settlements on 43 countries from 2000 to 2018 and found that the Korean government’s debt rose annually by 14.4 percent, only trailing Argentina, at 29.2 percent, and China, at 17.9 percent.

The think tank, which is under the Federation of Korean Industries business lobby, said that while the debt-to-GDP ratio for Korea stood at 38.9 percent last year - lower than the global average of 69.2 percent-the fast rise was a cause for concern.

“Government debt should be managed responsibly as it serves to be the foundation for the economy during times of crisis,” said Choo Kwang-ho, head of job strategy at KERI.

Korea’s economic growth is expected to slow this year. The central bank forecast growth of 2.2 percent compared to last year’s 2.7 percent growth.

The think tank also pointed to other areas of concern, such as household debt and the burden from pension and health care spending over the long run.

KERI said its analysis found that Korea’s household debt-to-GDP ratio was the seventh-highest among 43 countries last year at 97.7 percent.

Korea’s ratio of liabilities from pension and health care spending to GDP in 2050 is estimated to be at 159.7 percent, the highest among advanced economies, according to a report from the IMF in April.

While the government maintains that Korea’s fiscal health is sound, Finance Minister Hong Nam-ki said last Tuesday he was monitoring the pace of the rise in the government debt as the government works to stimulate the economy.

The government will issue 60.2 trillion won ($49.7 billion) worth of bonds next year to make up for tax shortfalls, compared to 33.8 trillion won worth of bonds this year.

Under the government’s five-year fiscal plan, government debt is expected to rise to 1,061.3 trillion won in 2023, increasing the national debt-to- GDP ratio to 46.4 percent that year.

BY CHAE YUN-HWAN [chae.yunhwan@joongang.co.kr]
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