Korea's Sovereign Debt Surpasses W900 Trillion

The government's tax revenues increased by W55 trillion in the first seven months of this year, but spending rose even faster (US$1=W1,169). The resulting fiscal deficit of W20 trillion inflated Korea's sovereign debt to over W900 trillion.

According to the Ministry of Economy and Finance on Thursday, tax revenues rose 32.8 percent on-year from January to July to W223.7 trillion.

"Corporate tax and VAT revenues increased after the second half of last year due to an economic recovery, while robust real estate and stock markets led to rising capital gains and securities transaction taxes," the ministry said.

Other fiscal gains including fines and profits on fund investments also increased 27.3 percent to W356.9 trillion.

But over the same period, government spending increased by W21.6 trillion to W377.6 trillion, resulting in a W20.7 trillion deficit. Due to the deficit, Korea's sovereign debt increased from W898.1 trillion in June to W914.2 trillion in July, surpassing W900 trillion for the first time.

Normally, the fiscal deficit narrows in the second half due to the frontloading of government budgets in the first half. But this year, the surge of coronavirus infections stymied the recovery, raising concerns of a drop in tax revenues.

According to the government's forecast, Korea's sovereign debt is expected to increase to W965.3 trillion at the end of this year and surpass W1 quadrillion at the end of 2022 to reach W1.07 quadrillion.