Last Year, General Government Debt Ratio at 42.2% of GDP... Highest Ever Recorded

2019 Fiscal Year General Government and Public Sector Debt Calculation Results

D2 and D3 Both Surge by 2.2%P Compared to the Previous Year
"Worsening Fiscal Revenue Conditions Due to Economic Slowdown and Increased Countercyclical Spending"
Ministry of Economy and Finance: "Debt Ratio Favorable Compared to Major Countries"

[Sejong=Asia Economy Reporter Joo Sang-don] Last year, the ratio of general government debt (D2) and public sector debt (D3) to the Gross Domestic Product (GDP) turned to an upward trend for the first time in three years. The D2 ratio recorded 42.2%, the highest level since the related figures began to be calculated in 2011.

On the 24th, the Ministry of Economy and Finance announced the "2019 Fiscal Year General Government and Public Sector Debt Calculation Results" containing these details.

According to the report, the D2 ratio to GDP in 2019 was 42.2%, and the D3 ratio was 59.0%, each rising by 2.2 percentage points compared to the previous year. The increase rate of the D2 ratio is the steepest since the announcement began in 2011 according to international standards, and the D3 ratio's rise is the sharpest since 2012 (2.8 percentage points).

The debt statistics calculated and managed by the government are divided into national debt (D1), D2, and D3. To systematically manage the debt of the entire public sector, the government has been disclosing the previous year's actual figures of D2 and D3 annually at the end of each year since the 2011 fiscal year, following international standards.

Kang Mi-ja, Director of Fiscal Soundness at the Ministry of Economy and Finance, explained, "Unlike 2017 and 2018, when fiscal revenue conditions were favorable, in 2019, the economic slowdown worsened fiscal revenue conditions. This, combined with increased countercyclical spending, led to a rise in government bond issuance."

In fact, the government's revenue growth rates were 7.2% in 2017, 8.1% in 2018, and 1.7% in 2019. The expenditure growth rates during the same period were 5.6%, 6.8%, and 11.7%, respectively.

However, the Ministry of Economy and Finance maintains that Korea's debt ratio is at a lower level compared to major countries. Korea's D2 (KRW 810.7 trillion) ratio (42.2%) is less than half of the OECD debt ratio (110.0%) and ranks 6th among 33 countries.

The D3 (KRW 1,132.6 trillion) to GDP ratio is 59.0%, ranking 2nd among the seven OECD countries that calculate D3. However, since only seven countries calculate D3, international comparison of D3 has its limitations.

Director Kang stated, "Considering that the general government and public sector debt ratios have shifted to an upward trend since 2019 and fiscal risks due to demographic changes, strengthening fiscal soundness management is necessary. The government plans to continue efforts to manage fiscal soundness through expenditure efficiency, expanding the tax base, and legislating fiscal rules."

This content was produced with the assistance of AI translation services.