The actual debt of Korea, including public companies such as Korea Electric Power Corporation and Korea Expressway Corporation, exceeded 1100 trillion won. The debt per capita is over 21 million won. Hidden debts, such as public enterprises, turned to increase with the Moon Jae-in administration. It is pointed out that it has nothing to do with the increase in populist (populist) policy projects that utilize public enterprises as the expenditure increases while the revenue decreases.
On the 24th, the Ministry of Strategy and Finance released the results of the 2019 general government debt and public sector debt calculations. Last year, the general government debt (D2), which added non-profit public institutions to the government and local government debt (D1), was estimated to be 81.07 trillion won. It increased by 51 trillion won from 77.5 trillion won in the previous year. The ratio of debt to gross domestic product (GDP) increased by 2.2 percentage points (P) from 40.0% to 42.2%. The debt-to-equity ratio reached an all-time high since statistics were compiled in 2011. The growth rate was the highest since 2015 (9.0%). The increase was also the largest since 2015 (55 trillion won).
The fiscal authorities evaluated that it was good at less than half of the OECD average of 110.0%. It is explained that it is ranked 6th out of 33 countries in comparison member countries. The ratio of D2 in major countries is △108.4% in the United States, 225.3% in Japan, 116.1% in the UK, and 68.1% in Germany. Five countries with higher D2 fiscal soundness than Korea are: △Estonia (13.4%) △Luxembourg (30.0%) △New Zealand (32.6%) △Czech (37.7%) △Switzerland (38.1%).
▲ Annual trends and details of public sector debt.ⓒ
Public sector debt (D3), which is interpreted as’hidden debt’, including non-financial public enterprises such as Korea Land and Housing Corporation (LH) and Seoul Urban Housing Corporation (SH), was 1132 trillion won as of the end of last year. An increase of 54 trillion won from 1078 trillion won last year. The debt of central non-financial public corporations such as potters, KEPCO, and power generation subsidiaries increased by 5.9 trillion won to 359 trillion won, and the debt of local non-financial public corporations such as SH also increased by 1.8 trillion won a year to 4.37 trillion won. The amount of increase was the largest since 2014 (58 trillion won).
The debt-to-equity ratio rose 2.2 percentage points from 56.8% to 59.0%. The rise was the largest since 2013 (2.9%P). The fiscal authority added that it was the second-best level after Mexico (47.5%) out of seven OECD countries that produced D3. An official at the Ministry of Information and Transportation explained, “The high proportion of long-term debt (86.7%), fixed interest rate (97.0%), and domestic creditors (86.7%) has low debt risk in terms of quality.”
If the public sector debt is calculated as a debt per capita, it is about 2,168,000 won (based on the estimated population).
Some economists point out that the government’s belated fiscal rules are at the level of savagery, so management should be strengthened. Professor Kim Dae-jong of the Department of Business Administration at Sejong University said, “In Korea, there are many cases of large-scale national projects through public enterprises, and even if public enterprises go bankrupt, the government guarantees them.” “We need to manage the national debt ratio, including debts from public enterprises “Do” he emphasized. Fiscal authorities agree that fiscal soundness management should be strengthened. An official from the Ministry of Science and Technology said, “Both of the D2 and D3 debt ratios as of last year are at a good level when compared to major countries.” “There is a need to strengthen the management of financial soundness.” For management, the fiscal authorities plan to improve expenditure efficiency, strengthen the taxation of fugitive income, expand the revenue base such as maintenance of non-taxation and reductions, and enact fiscal rules.
The debt-to-equity ratio has turned to an increase in the current government. The rate of increase in D2 declined from 1.1%P in 2015 to 0.4%P in the following year and negative (-)1.1%P in 2016 at the end of the Park Geun-hye administration’s term. After the Moon Jae-in administration stopped at -0.1%P in 2017, 2.2 last year. It rebounded to %P. The same goes for D3. The decline remained at -0.8%P in 2015, -1.0%P in 2016, and -2.6%P in 2017, but after slowing to -0.1%P in 2018, it jumped to 2.2%P last year.
