In the first quarter of this year, Korea's government debt-to-GDP ratio surpassed 47%, hitting an all-time high.
According to the Bank for International Settlements (BIS) on the 17th, Korea's government debt-to-GDP ratio stood at 47.2% at the end of the first quarter this year. Under the BIS definition, government debt includes only the narrow measure of national debt, excluding nonprofit public institutions and nonfinancial state-owned enterprises.
This ratio first exceeded 40% in the first quarter of 2020 (40.3%), at the onset of COVID-19, and has steadily climbed to 44.1% in the first quarter of 2023 and 45.2% in the first quarter of last year. It dipped to 43.6% in the fourth quarter of last year, but rose again this year, reaching the 47% range for the first time since 1990, when the BIS began compiling the related statistics.
The BIS estimated the size of government debt at about 1.212 quadrillion won at the end of the first quarter this year. In won terms, that is a record high. In dollar terms, it was about $822.2 billion, down 5% from the peak in the third quarter of last year (about $868.3 billion). The decline is attributed to the won-dollar exchange rate rising, which reduced the converted debt amount in dollars.
Experts see a possibility that the government debt ratio could rise further, as the Lee Jae-myung administration has signaled bold fiscal expansion. Bank of Korea Governor Lee Chang-yong said in a lecture at Seoul National University the previous day that "the economy is weak now, so fiscal policy needs to play a certain role," but also noted, "it is not good to move in a direction where national debt keeps increasing."
However, Korea's government debt-to-GDP ratio remains low compared with major countries. Among the 28 member countries of the Organization for Economic Cooperation and Development (OECD) included in the BIS data, Korea ranked 18th, far below countries such as Japan (200.4%), Greece (152.9%), Italy (136.8%), the United States (107.7%), and France (107.3%).
The household debt-to-GDP ratio is declining. In the first quarter of this year, it stood at 89.5%, the lowest since the third quarter of 2019 (88.3%) before the spread of COVID-19. The ratio climbed to 90.0% in the first quarter of 2020 and surged to 99.1% in the third quarter of 2021 before steadily falling. Among OECD members, Korea ranked sixth, after Switzerland (125.3%), Australia (112.7%), Canada (99.1%), the Netherlands (94.0%), and New Zealand (90.1%).
The corporate debt-to-GDP ratio rose slightly from 110.6% in the fourth quarter of last year to 111.3% in the first quarter of this year. Nonfinancial sector credit, the sum of government, household, and corporate debt—so-called "national total debt"—reached 6.373 quadrillion won at the end of the first quarter, marking an all-time high.