National debt hit new record to surpass 50% of GDP in 2023

Economy

Published: 11 Apr. 2024, 17:54

National debt hit new record to surpass 50% of GDP in 2023

President Yoon Suk Yeol speaks during a government meeting to review the implementation of policies discussed during 24 government-public debates on livelihood issues at the presidential office in Seoul on April 4, 2024. [Yonhap]

Korea's national debt last year hit a record high of 1,126.7 trillion won ($826.6 billion), accounting for more than 50 percent of the country's debt-to-gross domestic product (GDP).

The sovereign debt, which covers bond sales and financial borrowing by central and provincial governments, grew by 59.4 trillion won from a year earlier, according to the report on the national settlement for last year presented by the Ministry of Economy and Finance on Thursday.

Of the total, debt incurred by the central government went up 59.1 trillion won to 1,092.5 trillion won, while that of provincial governments was presumed to have increased by 300 billion won to 34.2 trillion won.

The record amount came despite belt-tightening policy measures by the government following expansionary fiscal spending over the past several years amid the Covid-19 pandemic.

The size of the debt has risen at a fast pace recently, from around 723.2 trillion won in 2019 to 846.6 trillion won in 2020, 970.7 trillion won in 2021 and further to 1,067.4 trillion won in 2022.

The debt-to-GDP ratio also rose to an all-time high of 50.4 percent in 2023, up from 49.4 percent in 2022. It was the first time that the ratio hovered over 50 percent since the government began compiling relevant data in 1982, but was in alignment with expectations that it would hover around 50 percent in 2022 and 2023.

The figure stood in the 30 percent range from 2011 through 2019 before rising to the 40 percent range in 2020.

The fiscal debt continues to accumulate, putting upward pressure on the sovereign debt every year, according to the ministry.

The settlement report, approved by the Cabinet on Thursday, will be submitted to the National Assembly after a review by the state audit agency.

In 2023, total revenue sank 13.4 percent on-year in 2023 to come to 497 trillion won due mainly to a 51.9 trillion-won decline in tax revenue amid an economic slowdown.

Expenditures also fell 12.4 percent to 490.4 trillion won.

The consolidated fiscal balance, a key gauge of fiscal health, logged a deficit of 36.8 trillion won last year, narrowing from a shortfall of 64.6 trillion won in 2022.

The managed fiscal balance, a measure of fiscal soundness calculated after excluding the balance of social safety funds, also posted a deficit of 87 trillion won in 2023.

Last year's figure was an improvement over a shortfall of 117 trillion won in 2022, but the deficit in the managed fiscal balance came to 3.9 percent of the GDP in 2023, higher than the 2.6 percent forecast in the yearly budget bill.

The Yoon Suk Yeol administration had vowed to maintain the managed fiscal deficit within 3 percent of the GDP and curtail it to within 2 percent if the government's debt-to-GDP ratio surpasses 60 percent, but experts say weak private spending amid sticky inflation and long-term challenges like the low birthrate and aging population may continue to aggravate the deficit.

BY JIN MIN-JI, YONHAP [jin.minji@joongang.co.kr]