As the government decided to issue close to 10 trillion won in deficit government bonds to pay for the 4th disaster support fund, the possibility that the amount of debt will exceed 1,000 trillion won this year has increased.
The government expects that the ratio of national debt to gross domestic product (GDP) could exceed 50% within the next two or three years. It is difficult to rule out the possibility that the 50% era will arrive within this year.
Of the 19.500 billion won worth of Corona 19 damage support measures decided by the government on the 2nd, the budget prepared through an additional correction budget (additional) is 15 trillion won. The remaining 4.5 trillion won will be used this year’s final budget.
In addition, 5 trillion 100 billion won of the 15 trillion won will be covered by available financial resources such as world surplus (2.6 trillion won) and funding resources (1.7 trillion won). Eventually, the scale of issuance of deficit government bonds, which affects the national fiscal soundness, was confirmed to be 9 trillion won.
With the government issuing an additional 10 trillion won worth of deficit treasury bonds, the national debt from 956 trillion won in the current budget will increase to 965 trillion won this time. The ratio of national debt to GDP also increased by 0.9 percentage points from 47.3% to 48.2%. The debt-to-debt ratio rose by 0.5 percentage points only by supplementation, and 0.4 percentage points higher as the lower GDP forecast for this year was reflected.
As fiscal soundness indicators deteriorated rapidly, the government also expressed concerns.
Deputy Prime Minister Hong Nam-ki and Minister of Strategy and Finance announced the finalized supplementary bill on the same day. “At the current speed, it takes only two or three years for the national debt ratio to reach the 50% level, so it is not a situation to be relieved,” he said.
However, analysis is emerging that even this may be optimistic. The government has said that if the spread of Corona 19 slows, it will review the formation of the 5th supplementary budget to provide subsidies to all the people in order to stimulate the economy.
In particular, as the ruling party is pushing ahead with a plan to implement the’Small Businessmen Loss Compensation System’ from July, fiscal demand is expected to increase further. Here, the spread of Corona 19 is not quiet, and if you imagine the need to pay additional disaster subsidies, your financial capacity will fall further.
Experts are convinced that they should be wary of the fact that the rate of increase in national debt is too fast. The ratio of national debt to GDP, which was 37.1% based on this budget in 2019, reached 44% last year, but it is dangerous to exceed 50% this year.
Professor Seong Tae-yoon of Yonsei University said, “The reason we were able to endure the foreign exchange crisis in the past was supported by our solid fiscal soundness.”
Sejong = Reporter Min Jae-yong [email protected]
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