SEOUL, April 7 (Korea Bizwire) — South Korea’s national debt rose by 39 trillion won (US$35.9 billion) in 2014 from a year earlier as the government engaged in expansionary spending to prop up the weak economy, the finance ministry said Tuesday.
According to the 2014 settlement of accounts, the national debt that covers the central government’s general and special accounts and funds reached 503 trillion won last year, up from 464 trillion won a year earlier.
The size of debt is equal to 33.9 percent of the nation’s gross domestic product last year, up from 32.5 percent tallied for 2013.
Counting regional government debts, the nation’s general government debt soared to 530.5 trillion won last year, the ministry added.
“The national debt rose last year due to the operational budget balance deficit, a general spike in debt coupled with expansionary policies to vitalize the economy,” said Noh Hyeong-ouk, deputy minister for fiscal affairs.
Expanded spending did help the country post an economic growth rate of 3.3 percent last year, compared with a 3 percent gain a year earlier, he said.
Last year’s growth marked the first time since 2011 that the South Korean economy grew on par with the global average.
The operational budget deficit refers to the consolidated fiscal balance minus the surplus created by the country’s social security funds, such as the national and teachers pension and employment insurance. Last year the budget deficit in this field reached 29.5 trillion won, up 8.4 trillion won from the year before.
The official said the country’s public sector debt, which encompasses general government debt and the balance of non-financial public corporations, expanded by 93.3 trillion won to 1,211.2 trillion won last year, up from 1,117.9 trillion won in 2013.
Public sector debt is used as an indicator for the fiscal soundness of a country’s public sector and can be used to assess fiscal risk management.
The settlement of accounts, to be submitted to the National Assembly in late May, also showed net national assets standing at 543.3 trillion won last year, down 5.1 trillion won from 548.4 trillion won.
Total assets reached 1,754.5 trillion won, with debt hitting 1,211.2 trillion won. This includes 643.6 trillion won in debts that the government must pay pensioners in the long run. Pension-related liabilities surged by 47.3 trillion won last year, while the issuance of Treasuries to make up for fiscal shortfalls stood at 38.4 trillion won.
On the country’s fiscal soundness, the ministry said that general government debt and public sector debt were well below numbers for other members of the Organization for Economic Cooperation and Development (OECD).
“Compared to 2007, the country’s national debt increased 7 percentage points as of 2014, while the OECD average in the same period reached 25.2 percentage points,” the official said.
South Korea’s healthy fiscal health has been attributed to less money spent on welfare vis-a-vis other member economies, with such low numbers expected to go up down the road in the face of a rapidly aging society.