National debt per capita surpasses ￦18M, and it's only up from here

National debt per capita surpassed the 18-million-won ($15,000) mark, and the number is only expected to rise due to pandemic economic stimulus packages.

According to the National Assembly Budget Office on Aug. 13, national debt per capita rose 16.9 percent on year to 18 million won.

The per capita figure is calculated by dividing the total national debt, 930.6 trillion won, by Korea's total registered population of 51.7 million people. The figure identifies how leveraged the government is and evaluates the default risk of government bonds.

With President Moon Jae-in’s social welfare policies and multiple supplementary budgets for the pandemic, the speed in which the national debt and per capita figure are rising has been accelerating.

Debt per capita was 12.1 million won before the Moon Jae-in administration, and grew 5.9 million won since he took office, rising at an average of 1.3 million won per year — almost twice that of the average yearly increase of 620,000 won between 2000 and 2016.

Per capita debt surpassed the 13-million-won mark in February 2018, and it took another 11 months to add 1 million won to surpass 14 million won in November 2019. It took a quicker seven months to add another million won to 15 million won in June last year. It only took Korea two months to add the last 1 million won to reach 18 million won.

The government announced in March that it estimates the national debt to be 1,091.2 trillion won next year, with its debt-to-GDP ratio at 52.3 percent. National debt is expected to grow 11.5 percent on year to 1,217.1 trillion won in 2023, and up 10.7 percent on year to 1,347.8 trillion won in 2023. The ratio after this year's budget was 48.2 percent.

Some show concerns that the real debt may be even larger than the estimate.

President Moon Jae-in announced on July 29 that “the government will actively utilize government finances to serve as a support system for the citizens,” ahead of planning next year’s budget.

The national budget next year is expected to be a record high, also adding to the debt. Insiders say the Ministry of Economy and Finance will try to stick close to the total budget proposal of 593.2 trillion won, but could exceed 600 trillion won after negotiations at the National Assembly.

Debt-to-GDP ratio possibly passing the 50 percent mark for the first time has also been alarming to many.

“Increasing national debt while the birth rate is decreasing and we’re becoming an aging society will heavily weigh on the next generation,” said Kim In-june, an emeritus professor of economics at Seoul National University. “Even when we want to implement certain policies, we’re going to have less financial autonomy.”

According to a report released by the National Assembly Budget Office, Korea had a debt-to-GDP ratio of 40 percent when it became an aging society in 2018, meaning more than 14 percent of the population was aged 65 and above. Many other countries such as Germany and France were in better situations: Germany had a debt-to-GDP ratio of 14.1 percent when it was considered to have an aging population, and France 32.8 percent.

Lee further emphasized that this is a time that Korea should be focusing on improving its fiscal health rather than improving the economic outlook.

BY JEONG JIN-HO, LEE TAE-HEE [lee.taehee2@joongang.co.kr]