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National Debt May Exceed GDP in 2050

Posted February. 17, 2007 07:26,   


One of Korea’s research institutions on government policy revealed the possibility that South Korea’s national debt will overpass its gross domestic product around the year 2050 if the government continues to expand its budget in the welfare sector at the current rate.

According to a report made by the Korea Institute of Public Finance (KIPF) on February 15, ‘The Sustainability of South Korea’s national debt,’ it was shown as the result of an analysis that the percentage of national debt in relation to GDP, which is about 30 percent presently, will rise up to 42.7 percent in 2035 if the government continues to expand its expenditures on welfare at the current rate without reducing expenditures in the economic sector.

It is also anticipated that the percentage of national debt in relation to GDP will soar up to 113.7 percent by 2050, 226.7 percent by 2060, and 371.9 percent by 2070.

National debt refers the amount the government borrowed from sources in and out of the state in order to make up for the fiscal deficit, and is the determinate obligation for which the government has the biggest responsibility to compensate. This includes the financial obligations of the central government and regional governments.

South Korea’s national debt grew from 133.6 trillion won at the end of 2002, the year right before the first year of the current government, to 248 trillion won three years later at the end of 2005, and to 283.5 trillion won at the end of last year, and is expected to rise beyond 300 trillion won at the end of this year.

“The national debt of South Korea is sustainable in the short- and mid- run, but not in the long run. Taking into consideration the potential debt from the national pension, the fall in potential growth and the aging of Korean society, it is highly necessary that the government pays keen attention to the rate at which national debt grows,” the KIPF pointed out.