The DP's Lee says Korea shouldn't worry about its debt. Here's what critics say he's missing.

Home > National > 2025 Presidential Election

The DP's Lee says Korea shouldn't worry about its debt. Here's what critics say he's missing.

Published: 23 May. 2025, 12:01 Updated: 23 May. 2025, 13:00

Audio report: written by reporters, read by AI

Democratic Party presidential candidate Lee Jae-myung gives a speech while campaigning in Jeju on May 22. [JOONGANG ILBO]

Democratic Party presidential candidate Lee Jae-myung called “people who think that a country shouldn't be in debt” ignorant — but experts say it's not so simple.

Lee, whose policies center on aggressive fiscal expansion, claimed during his campaign on Wednesday that Korea shouldn't fret over the country's rising national debt, pointing out that Korea’s debt-to-GDP ratio remains below 50 percent while those of many developed economies come in above 110 percent.

“During the Covid-19 pandemic, other countries took on debt equivalent to 10 to 20 percent of their GDP to support their people,” Lee said. “We, however, clung to the strange notion that nothing should be handed out for free and only offered loans.”

Indeed, some advanced economies carry much higher debt ratios than Korea. The International Monetary Fund projected in its World Economic Outlook released in April that general government gross debt, as a percent of GDP, would reach 122.5 in the United States, 234.9 in Japan and 116.3 in France this year, but just 54.5 in Korea.

The IMF’s definition includes the debt of nonprofit public institutions, in addition to the standard government bureau count used in Korea, making it a common standard for international comparisons.

Experts warn that comparing Korea to nations that use reserve currencies is misleading. Countries like the United States, Japan and members of the eurozone can issue debt in their own currencies, mitigating risks.

“Reserve currency nations face less risk of credit downgrades and can issue bonds at lower rates due to global demand for their currencies,” said Seok Byoung-hoon, an economics professor at Ewha Womans University. “But nonreserve currency nations like Korea risk capital flight and rising interest rates if their credit ratings fall.”

Among nonreserve currency economies, Korea already ranks high in both debt volume and growth.

The IMF projects that Korea’s 2024 debt-to-GDP ratio will exceed the average of 54.3 percent among 11 comparable nations, trailing only Singapore's 174.9 percent, Israel's 69.1 percent and New Zealand's 55.3 percent. Korea’s debt is also rising rapidly, with a projected increase of 4.7 percentage points in the next five years — the second-fastest after the Czech Republic.

Lee’s assertion that the government’s reluctance to take on debt during the Covid-19 pandemic shifted the burden onto small business owners also runs counter to fiscal data.

Korea’s national debt surged from 723.2 trillion won ($523 billion) in 2019 to an estimated 1,175.2 trillion won in 2024, growing at an annual average of 11.7 percent. The debt-to-GDP ratio also jumped from 35.4 percent to 46.9 percent during that period, driven in part by universal emergency relief payouts totaling 59 trillion won.

Looking ahead, Korea’s debt burden will grow further due to rapid aging and a shrinking work force. The National Assembly Budget Office projects that mandatory spending — which includes welfare and pensions — will reach 368 trillion won this year, more than half of total government expenditure. That figure is expected to rise to 453.7 trillion won, or 57.8 percent of the budget, within five years.

Excessive debt accumulation could jeopardize Korea’s credit standing under current circumstances. Moody’s Ratings recently downgraded the United States’ sovereign rating from Aaa to Aa1 due to high debt. Fitch Ratings lowered China’s rating, and Moody’s and S&P Global Ratings downgraded France for similar reasons.

The People Power Party criticized Lee’s remarks as fiscally reckless.

“Who will repay that debt — today’s youth?” said Kim Yong-tae, head of the PPP's emergency leadership committee. “Is Lee planning to declare a moratorium like he did during his time as Seongnam mayor?”

Still, others argue that more fiscal support is needed in the face of sluggish domestic demand.

“Lee’s comments are about strengthening the role of fiscal policy, not simply increasing debt,” said Ha Joon-kyung, a Hanyang University economics professor and Lee’s campaign adviser. “With household debt surpassing 90 percent of GDP and limiting consumption, the government should step in to ease the public’s burden.”

Translated from the JoongAng Ilbo using generative AI and edited by Korea JoongAng Daily staff.
BY KIM NAM-JUN, JANG SEO-YUN [[email protected]]