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South Korea's National Debt To Exceed 600 Trillion Won, Raises Concerns On Country's Fiscal Health

By February 1, 2016 at 11:00 am
South Korea's National Debt To Exceed 600 Trillion Won, Raises Concerns On Country's Fiscal Health (Photo : Chung Sung-Jun | Getty Images News)

SOUTH KOREA - After years of having steady debt growth, the national debt of South Korea is anticipated to exceed more than 600 trillion won or almost $500 billion for the very first time this week, an official data by the National Assembly Budget Office (NABO) showed on Sunday.

With the skyrocketing amount for the national debt, it apparently raises concerns on the country's fiscal health while it faces other issues on slow economic progress and rapid aging of the population, The Korea Herald reports.

The government office revealed that the debt could reach 644.9 trillion won (about $5.4 billion) as 2016 concludes, gaining an increase of 49.8 trillion won ($414 million) from 2015's estimated national debt of 595.1 trillion won (about $50 billion).

"This represents an increase of 49.8 trillion won from a year earlier, with the country's dues growing by 100 trillion won in just 19 months," the budget office said.

Moreover, it said there are possibilities that it could reach the 700 trillion mark ($5.8 billion) in 2017 and 761 trillion won ($6.3 billion) two years after based on South Korea's fiscal management plan.

The rapid increase of the South Korea's national debt is due to government spending in response to alleviate the country's sluggish economy.

It even grew faster when the state had faced tax revenue deficits from 2011 to 2014, NABO further revealed.

Regardless of the fast debt growth, the Finance Ministry expressed that there is no immediate fiscal danger to address as the amount of debt is manageable and still lower compared to other developed countries around the world, Yonhap News Agency reports.

It pointed out the average debt to gross domestic product (GDP) ratio of countries belonging to the Organization for Economic Cooperation and Development (OECD) increased from 73.5 percent to 114.6 from 2007 to 2015. South Korea had an rise of 9.8 percentage points in the same period.

However, experts have raised concerns that the growing budget for the country's fast aging population could pressure the government to impose an additional budget for the elderly sector.

"As of now, debt-to-GDP ratio is lower than other countries, but this will be problematic in the future, along with the aging population," said Lee Kang-koo, an analyst at NABO.

"Even if spending is kept stable at the present range, national debt will rise at a very fast pace down the road because of rising demand for social welfare and medical-related outlays for senior citizens."

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