South Korea's National Debt Annual Growth Rate 3.2%... "1.8 Times the OECD Average"

"Need to Introduce Fiscal Rules to Maintain Fiscal Soundness"

[Asia Economy Reporter Park Sun-mi] Contrary to the international trend of decreasing national debt, South Korea's national debt is rapidly increasing, prompting calls for the introduction of fiscal rules to maintain fiscal soundness in the future.

On the 26th, the Korea Economic Research Institute (hereinafter ‘KERI’) announced that the current government's national debt increased by KRW 415.5 trillion from KRW 660.2 trillion in 2017 to KRW 1,075.7 trillion in 2022, showing a growth rate of 62.9%, which is 28.1 percentage points higher than the previous government's (2013-2017) national debt growth rate of 34.8%.

Although South Korea's national debt ratio is considered low compared to other advanced countries, the average annual growth rate of national debt from 2012 to 2023 according to OECD statistics (3.2%) is higher than the OECD average (1.8%), increasing the importance of management.

According to OECD statistics, South Korea's national debt-to-GDP ratio rose by 7.2 percentage points from 45.4% in 2020 to 52.6% in 2023, whereas 18 out of 33 countries are expected to see a decrease in their national debt ratios. Among the 15 countries with rising ratios, South Korea ranked eighth in terms of the increase. This contrasts with the OECD average national debt ratio, which decreased by 0.3 percentage points from 2020 to 2023.

According to an IMF report extending the forecast period to 2026, South Korea's national debt-to-GDP ratio is projected to reach 66.7% in 2026, up 18.8 percentage points from 47.9% in 2020, ranking first among 35 advanced countries in terms of increase. Twelve countries are expected to see an increase in national debt, but only four countries?South Korea, the Czech Republic, Malta, and New Zealand?are projected to have their debt ratios rise by more than 10 percentage points. The average national debt ratio of all 35 countries is also expected to decline by 4.1 percentage points from 122.7% in 2020 to 118.6% in 2026.

Lim Dong-won, a research fellow at KERI, stated, “The fact that most countries are experiencing a decrease in national debt ratios and that the number of countries with increasing debt ratios has decreased in the IMF statistics, which extend the period by three years compared to OECD statistics, indicates an international trend of fiscal spending shifting from expansionary fiscal policy during the COVID-19 pandemic to austerity, showing a trend of fiscal improvement.” He added, “Only South Korea’s national debt continues to increase significantly, which is concerning.” He further suggested, “Fiscal rules should be introduced to prevent excessive intergenerational inequality in terms of fiscal burden, and welfare expenditures such as pensions should be adjusted to ensure fairness with future generations in terms of fiscal spending.”

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