Ruling Party Presidential Candidate Calls for Spending... Yejongcheo Forecasts National Debt Exceeding 2000 Trillion Won by 2029

National Debt-to-GDP Ratio Soars from 47.3% to 75.2%
Management Fiscal Deficit Expected to Exceed 119 Trillion to 150 Trillion
Yejeongcheo Calls for Discussion on Fiscal Rules Including Korean-Style Fiscal Rule

[Sejong=Asia Economy Reporter Moon Chaeseok] It is forecasted that if the government's expansionary fiscal policy continues, the national debt will exceed 2,000 trillion won by 2029. Lee Jae-myung, the Democratic Party presidential candidate, has expressed the position that disaster relief funds should be provided to all citizens, but if expansionary fiscal policy is further strengthened, the point at which the national debt surpasses 2,000 trillion won is expected to be brought forward. Rather, there is advice that spending should be reduced and efforts to increase revenue should be intensified.

According to the '2021-2030 Medium-Term Fiscal Outlook' report by the National Assembly Budget Office on the 2nd, the national debt is expected to surpass 1,000 trillion won for the first time next year at 1,072.6 trillion won, and exceed 2,000 trillion won by 2029 at 2,029.5 trillion won. This means the national debt will increase by 1,000 trillion won in seven years. This estimate is based on the government's 2021-2025 National Fiscal Management Plan.

Accordingly, the national debt-to-GDP ratio is projected to surge from 47.3% (based on the main budget) this year to 75.2% in 2029. In 2030, the national debt is expected to reach 2,198.8 trillion won, with the debt-to-GDP ratio rising to 78.9%.

The integrated fiscal balance, which is the difference between national revenue and expenditure, and the management fiscal balance, which subtracts social security fund balances from the integrated fiscal balance, are both expected to see increasing deficits after next year. The integrated fiscal balance deficit will decrease from 83.5 trillion won this year to 61.9 trillion won next year but will expand to 67.1 trillion won in 2023 and is expected to exceed 100 trillion won for the first time in 2029, reaching 104.8 trillion won. The management fiscal balance deficit is also projected to increase from 119.2 trillion won this year to 150.9 trillion won in 2029. This implies that if expansionary fiscal policies continue to secure welfare policy funds even after COVID-19, the national fiscal soundness could deteriorate further.

The Budget Office forecasted that if the current policy stance is maintained, the management fiscal balance deficit ratio relative to nominal GDP will record 4.7% next year and maintain around 5% from 2023 to 2030. This is comparable to 4.6% during the IMF foreign exchange crisis in 1998, 3.6% during the global financial crisis in 2008, and 5.8% in the first year of the COVID-19 pandemic last year.

The Budget Office suggested expenditure control and revenue enhancement as solutions for fiscal soundness. If taxes are increased (raising the tax burden rate by 1 percentage point in 2023 and 2026), the national debt in 2030 would be 1,871.4 trillion won, and the debt-to-GDP ratio would be 67.1%, somewhat lower than the 2,198.8 trillion won and 78.9% ratio under the status quo scenario.

The Budget Office pointed out, "If expenditure control and revenue enhancement are not supported in the future, there is a possibility of rising national debt, so discussions on fiscal discipline such as Korea-style fiscal rules are necessary."

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