Published : Jan. 31, 2016 - 10:57
South Korea's national debt is expected to surpass the 600 trillion won ($498.1 billion) mark for the first time ever this week after growing steadily over the years, official data showed Sunday.
The total will mark a 4.9 trillion won increase from the estimated 595.1 trillion won in debt accumulated by Asia's fourth-largest economy as of late 2015, the National Assembly Budget Office said.
(Yonhap)
Based on this year's budget spending plan, the national debt could reach 644.9 trillion won by the end of 2016, it added.
"This represents an increase of 49.8 trillion won from a year earlier, with the country's dues growing by 100 trillion won in just 19 months," the budget office said. Seoul's debt reached 500 trillion won as of July 2014.
The country's debt was tallied at 113.1 trillion won in 2001, but this jumped to 238.8 trillion won in 2005 and rose to 402.8 trillion won in 2011.
The size of the national debt compared to the gross domestic product, which is an indicator of fiscal health, hit 30.1 percent in 2009 from 16.4 percent in 2001, with numbers to exceed the 40 percent mark this year. The numbers are expected to rise in the coming years.
According to the government's 2015-2019 mid- to long-term fiscal management plan, government debt can reach 692.9 trillion won in 2017 and rise further to 761 trillion won in 2019.
In the more comprehensive 2060 long-term fiscal forecast, the ratio of total debt to GDP may reach as high as 62.4 percent, while unforeseen developments like a sudden drop in growth can push this figure up to 158.4 percent.
The finance ministry said that while the country's debt is rising, it is still lower than most other developed economies around the world.
"The growth can still be managed in a safe and stable manner," the ministry in charge of making the country's economic policy said.
From 2007 through 2015, the average debt to GDP ratio of Organization for Economic Cooperation and Development countries rose from 73.5 percent to 114.6 percent, a gain of 41.1 percentage points, it pointed out.
In the same period, South Korea's debt rose 9.8 percentage points.
Policymakers have also said that one reason why Moody's Investor Service raised the country's sovereign rating to a record high Aa2 in December was because of the way Seoul has "successfully" managed its national debt.
Officials have said the goal is to keep national debt in the low 40 percent range this year. They said that after 2018, the rate of debt growth may actually decrease.
On the other hand, NABO argued that while the country's debt level is not really high at present, the country's population is aging at an alarmingly fast rate, which can put pressure on debt.
The Northeast Asian country became an aging society with 7 percent of its population over 65 in 2000, and will be an aged society with 14 percent of all people over 65 around 2017. Local experts said that 20 percent of the population will be over 65 in 2026, with the number of people living in the country as a whole to peak in 2030.
"Even if spending is kept stable at the present range, national debt will rise at a very fast pace down the road because of rising demand for social welfare and medical-related outlays for senior citizens," a researcher at NABO said.
He stressed that the government must pay close attention to its spending plans and try to push up growth if it wants to avoid serious problems in the future. (Yonhap)