Korea's Debt Rises More Steeply Than During Asian Crisis

  • By Seok Nam-jun

    July 30, 2020 11:33

    Korea's national debt-to-GDP ratio is rising faster than during the 1997 Asian financial crisis and 2008 global financial crisis, prompting urgent calls to buffer the country's fiscal health.

    The Korea Economic Research Institute in a report Wednesday warned that the country's debt is expected to rise W111.4 trillion on-year to W840.2 trillion this year based on government figures, pushing the debt-to-GDP ratio up 5.4 percentage points to 43.5 percent.

    In 2023, the national debt is forecast to exceed W1,000 trillion and the ratio over 50 percent.

    A notice of temporary closure is placed in front of a store in Seoul's shopping district of Myeong-dong on July 23. /Yonhap

    The institute said that it took seven years each for the debt-to-GDP ratio to rise from the 10-perent range (1997) to the 20-percent range (2004) and then to the 30-percent level (2011). And it has since taken nine years to surpass 40 percent but will take only three years to soar over 50 percent.

    In comparison, the ratio increased 3.9 percentage points during the Asian financial crisis and 3 percentage points during the global crisis.

    Choo Kwang-ho at KERI said, "Fiscal spending is necessary due to the economic slump caused by the coronavirus epidemic, but we need to watch the figures closely. The government must draw up tight rules to ensure that fiscal expenditures remain within the limits of state revenues and stick to them."

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