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NABO: National debt rising faster than usual

Feb 12,2018
In the past two months, the national debt has risen 0.7 percent, a rate that the legislature’s budget office expressed concern about on Sunday.

According to the National Assembly Budget Office, as of Saturday, the national debt stood at 671.5 trillion won ($619 billion), adding 4.6 trillion won compared to the end of last year.

The office estimated it could reach 708.2 trillion won by the end of this year.

Per capita, government debt was 13 million won, more than double 6.31 million won in 2008.

The report comes as the government grapples with greater welfare payments for an aging population and larger pool of unemployed youth.

Since 2013, the budget office has been posting the national debt to its website to raise awareness of rising government spending. The figure includes outstanding debt held by central and regional governments.

The figure, however, does not include state-owned companies’ debts and monetary stabilization bonds.

The growing national debt indicates that the government is spending more than it is making. Such debt has been particularly gaining momentum in recent years as the government has been increasing welfare payments and investing more in various industries to boost the economy.

This year’s government budget is 7.1 percent higher than last year’s at 429 trillion won. It represents the largest year-on-year growth since 2009, when it went up by 10.6 percent.

The spending is expected to cause a deficit of 28.5 trillion won.

Government debt will likely continue to grow with the Moon Jae-in administration’s goal of increasing spending by an average 5.8 percent annually until 2022 to tackle social challenges such as low birthrate, gender disparity in the workplace and an aging population.

Korea’s national debt compared to that of other advanced economies is relatively small, but the rate at which it is growing has become a major issue.

According to the budget office report, between 2000 and 2016, Korea’s national debt grew an average 11.6 percent annually, faster than the United Kingdom’s 9.5 percent, the United States’ 8.8 percent, Spain’s 7 percent, France’s 5.8 percent, Japan’s 3.6 percent and Germany’s 3.4 percent.

Last year’s debt made up 40.4 percent of Korea’s gross domestic product, surpassing 40 percent for the first time.

Although Korea’s national debt ratio is smaller than the OECD average of 113 percent as of 2016 - especially when compared to neighboring Japan’s 232 percent, the highest in the OECD - the figure is expected to further increase by 41 percent in 2021, according to the budget office.

The burden is also expected to rise especially as central banks around the world are tightening their monetary policies.

Last week, global stock markets fell amid concerns that the U.S. Federal Reserve might quicken the pace of interest rate increases as inflation is rising faster than expected.

The Bank of Korea is under pressure to raise its own rates after elevating them to 1.5 percent from a record-low of 1.25 percent last November. It was the first hike in six and a half years.

BY LEE HO-JEONG [lee.hojeong@joongang.co.kr]