National debt has grown three times as fast as the country’s gross domestic product growth since the Asian currency crisis in the late 1990s, raising concerns over its fiscal viability.
Korea is expected to see its national debt reach 515.2 trillion won ($478.5 billion) next year, according to data on 2014 fiscal budget proposed by the Ministry of Strategy and Finance.
It will increase almost nine-fold in 2014 from 1997 when its national debt stood at more than 60 trillion won.
The Finance Ministry projects that Korea’s nominal GDP, meanwhile, will grow 3.9 percent annually to 1.41 quadrillion won next year.
This is about triple the GDP in 1997 of 506 trillion won.
This also means that per capita debt will amount to almost 10 million won per taxpayer amid increasing national debt and slow population growth, compared to 1.3 million won per taxpayer in 1997.
The country’s national debt of central and regional governments is expected to hit almost 40 percent of its GDP in 2014 and 2015, from about 12 percent in 1997.
Korea’s 2014 budget has called for increased spending on welfare and job creation as part of efforts to revitalize the economy.
The Park Geun-hye administration’s welfare and economic policies had inevitably led to a debt increase as it had to devise a supplementary budget while facing a shortfall in tax revenue amid the slowdown.
Analysts expect the government to face difficulties in achieving a fiscal balance within five years as its welfare costs continue to grow.
Even though it will boost the country’s tax revenue by normalizing the underground economy, increasing tax levies on financial income and downsizing tax exemptions, it will have to raise other types of taxes for fiscal soundness in the long run.
Korea’s outstanding debt of its public, corporate and household sectors reached a record high in proportion to its GDP in the second quarter of this year, according to data by the Bank of Korea.
The debt neared 290 percent of Korea’s annual economic output, exceeding the debt-to-GDP ratio of 285.2 percent recorded in the second quarter of 2009, during the global financial crisis.
By Park Hyong-ki (
hkp@heraldcorp.com)
