"Korea's National Debt Ratio May Rise to 50% Next Year Due to COVID-19 Response"

Bloomberg Affiliate Report... "Moon Administration Maintains Moderate Fiscal Expansion Policy Until End of Term"

Hong Nam-ki, Deputy Prime Minister for Economy and Minister of Strategy and Finance. / Photo by Hyunmin Kim kimhyun81@

[Asia Economy Reporter Moon Chae-seok] There is a forecast that if the economic shock from the novel coronavirus infection (COVID-19) expands, South Korea's national debt-to-GDP ratio could rise to 50% next year.

On the 17th, Bloomberg Intelligence (BI), a research institute under Bloomberg, presented a scenario of prolonged global economic recession due to COVID-19 in a recent report.

The report predicted that South Korea's GDP would decrease by 1.4% this year and that the fiscal deficit would increase further due to additional stimulus measures.

In this case, South Korea's national debt-to-GDP ratio is expected to rise from about 37% last year to 46% this year.

Next year, although the economy is expected to grow by 2.1%, the government is anticipated to pursue somewhat expansionary policies, causing the national debt ratio to reach 50%.

In the baseline scenario where GDP decreases by 0.1% this year, the national debt ratio is expected to record 44% this year, and with a recovery in growth rate to 3.3% next year, it is forecasted to reach 46%.

BI stated, "The Moon Jae-in administration is expected to maintain a moderate fiscal expansion policy to sustain growth momentum until the end of its term in late 2022," adding, "The Bank of Korea's monetary policy will also support this."

BI forecasted that the Bank of Korea will lower the base interest rate from the current annual 0.75% to 0.50% within a few months.

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