National Debt Surpasses 2,000 Trillion Won, 'Record High'... South Korean Economy Burdened with Massive Debt

Last Year’s National Debt Hits Record 2,196 Trillion Won... Increased by 763 Trillion Won Under Moon Administration
Han Deok-su, Prime Minister Nominee, Emphasizes Fiscal Soundness Daily

President Moon Jae-in is speaking at the Cabinet meeting held at the Yeomin Hall of the Blue House on the morning of the 5th. [Image source=Yonhap News]

[Asia Economy Reporter Heo Midam] Last year, the national debt surpassed 2,000 trillion won for the first time in history. This is believed to be due to a significant increase in government bond issuance to overcome the COVID-19 crisis and increased fiscal burdens from expanding the number of public officials. As the national debt rapidly increased, concerns about the deterioration of fiscal soundness are rising. Experts analyzed that income-led growth policies pursued by the Moon Jae-in administration contributed to the increase in national debt.

Last year, the national debt (government debt) exceeded 2,000 trillion won for the first time, approaching 2,200 trillion won. National debt is a comprehensive concept that includes not only debts that the central and local governments must repay but also obligations such as pensions to be paid to public officials and military personnel, which the state is responsible for.

According to the '2021 Fiscal Year National Settlement Report' approved by the government at the Cabinet meeting on the 5th, South Korea's national debt in 2021 recorded an all-time high of 2,196.4 trillion won, an increase of 21.47 trillion won (10.8%) from 2020 (1,981.7 trillion won).

Among this, the pension liabilities for public officials and military personnel increased by 9.35 trillion won (8.9%) from 1,044.7 trillion won to 1,138.2 trillion won, accounting for about half of the total national debt.

In particular, under the Moon Jae-in administration, the national debt increased sharply over five years. Before the Moon Jae-in administration took office in 2016, the national debt was 1,433.1 trillion won. It increased by 763.3 trillion won (53.3%) in five years. Compared to 2019 (1,743.7 trillion won), before the spread of COVID-19, it rose by 452.7 trillion won (26%).

Accordingly, the debt per capita that each citizen must repay also increased. Dividing the national debt by the estimated population of 51.74 million from Statistics Korea last year, the per capita national debt was 18.69 million won, an increase of 2.36 million won in one year. This is 6.46 million won more than the 12.24 million won at the end of 2016 before the Moon administration took office and 4.72 million won more than the 13.97 million won at the end of 2019, just before COVID-19.

President-elect Yoon Suk-yeol is leaving the office of the 20th Presidential Transition Committee in Tongui-dong, Jongno-gu, Seoul, on the afternoon of the 6th. [Image source=Yonhap News]

Given this situation, the 50 trillion won supplementary budget (supplementary budget) promised by President-elect Yoon Suk-yeol is struggling to gain momentum. During his candidacy, Yoon pledged to push for a supplementary budget of up to 50 trillion won to support small business owners affected by COVID-19.

However, concerns are emerging about whether this pledge can be fulfilled due to the rapidly increasing national debt. There are also criticisms that if President-elect Yoon assembles a supplementary budget of up to 50 trillion won, it could further fuel inflation.

Meanwhile, Han Duck-soo, the nominee for Prime Minister and a former economic bureaucrat, has been emphasizing 'fiscal soundness' day after day. While acknowledging that expansionary fiscal policy is inevitable in the short term, he insists that excessive reliance on deficit bonds should be avoided during this process.

At a press conference on the 3rd, Han said, "There has been a tremendous expansionary policy recently to respond to infectious diseases," adding, "While it is very inevitable in the short term, fiscal soundness is a matter that only the government should feel a great sense of crisis about in the mid-to-long term and a task that must be addressed."

Criticism of the rapidly increasing national debt is also coming from within the political sphere. Kang Min-kook, the floor spokesperson for the People Power Party, issued a statement saying, "The record-high national debt is the result of reckless fiscal management over five years," and "Income-led growth, which poured government money while ignoring the private economy, only worsened income polarization, and the inconsistent social distancing measures tightened only on self-employed people made K-quarantine a 'self-employed kill (Kill)-quarantine.'"

Experts pointed out that the Moon Jae-in administration's income-led growth policies contributed to the sharp increase in national debt. Professor Kim Tae-gi of Dankook University's Department of Economics said, "'Income-led growth' means injecting fiscal resources to create jobs, expand welfare, and grow the economy. However, this policy can be considered a failure."

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