Public debt rises but the ratio to GDP flat at 57%

Korea’s public sector debt growth accelerated in 2018, but its share of the country’s GDP remained flat, the finance ministry said Thursday.

The country’s public sector debt, which includes the debt of the central government and state-funded firms, reached 1,078 trillion won ($926 billion) as of end-2018, up 34 trillion won from a year ago, according to data compiled by the Ministry of Economy and Finance.

It was 56.9 percent of the country’s GDP last year, marking the same portion as seen in 2017.

The zero growth in public debt is compared with a 2.6 percent decline in 2017 and a 1 percent fall in 2016.

“The public sector debt had been on the steady rise between 2011 and 2014, but the trend started reversing in 2015,” the ministry said in a statement.

General government debt, which covers the central and provincial governments, and non-financial public institutions, stood at 759.7 trillion won, up 24.5 trillion won from a year earlier. Its percentage of GDP also remained flat at 40.1 percent last year.

Despite the increase of the indebtedness, the Finance Ministry said that Korea’s fiscal state remains sound compared to other advanced economies.

Korea was ranked fourth in terms of its government debt-to-GDP ratio among 33 members of the Organisation for Economic Cooperation and Development (OECD), the ministry said.

The ratio stood at 40 percent, far lower than the OECD average at 109.2 percent.

As for public sector debt, Korea’s rate came at 56.9 percent, the second highest after Mexico among seven OECD member countries with relevant data.

The ministry vowed to maintain the healthy state with the restructuring of taxation and expenditures.

Earlier this month, the National Assembly approved next year’s state budget of 512.3 trillion won, up 9.1 percent from this year’s.

Finance Minister Hong Nam-ki has said the national debt could rise to the upper end of 39 percent of GDP next year, due to the expansionary fiscal policy to prop up the nation’s slowing economy.

BY PARK EUN-JEE, YONHAP [park.eunjee@joongang.co.kr]