[2020 National Settlement] National Debt Approaches 2000 Trillion Won... Surpasses Nominal GDP

[Sejong=Asia Economy Reporter Son Sun-hee] The increase in national debt reached an all-time high, with last year's national debt approaching 2,000 trillion won. This was due to a significant rise in expenditures in response to the COVID-19 pandemic, while revenue growth such as tax income was sluggish. Last year, the national debt exceeded South Korea's nominal Gross Domestic Product (GDP·1,924.5 trillion won) for the first time.

On the 6th, the government deliberated and approved the "2020 Fiscal Year National Settlement Report," which includes this information, at the Cabinet meeting held at the Government Sejong Complex, presided over by Prime Minister Chung Sye-kyun. According to the report, last year's national debt totaled 1,985.3 trillion won, an increase of 241.6 trillion won (13.9%) compared to the previous year. This is the largest scale and year-on-year increase in national debt since the first fiscal year of 2011, when the national financial statements were prepared on an accrual basis. Notably, this is also the first time since the introduction of the new national financial statements that the national debt has exceeded the size of the domestic GDP.

National debt is calculated by combining "confirmed debt," which has a fixed payment time and amount such as government bonds and borrowings, and "unconfirmed debt," which must be covered in the future. Confirmed debt, including treasury bonds, public bonds, and borrowings, increased by 111.6 trillion won in one year. In particular, to overcome the COVID-19 crisis last year, four supplementary budgets totaling 67 trillion won were prepared, and the issuance of treasury bonds to raise funds fully utilized the National Assembly's approval limit of 174.5 trillion won. Due to an increase in housing sales transactions last year, the outstanding balance of national housing bonds increased by 2.5 trillion won, and the outstanding balance of foreign exchange stabilization fund bonds also rose by 1.3 trillion won.

Unconfirmed debt, such as pension liabilities, also increased by 10.05 trillion won. Pension liabilities represent the present value of future pension payments to beneficiaries of public officials' and military pensions. During periods of low interest rates, the discount rate decreases, causing the size of pension liabilities to grow.

National debt for which the government is directly responsible for principal and interest repayment (central + local governments, D1) recorded 846.9 trillion won, an increase of 123.7 trillion won compared to the previous year. Accordingly, the national debt ratio, which is the proportion of national debt to GDP, surged by 6.3 percentage points to 44.0%. Dividing the national debt among the entire population means a debt of 16.35 million won per person.

As fiscal conditions worsened, the integrated fiscal balance, which recorded a deficit for the first time in 2019, saw its deficit widen further to 71.2 trillion won last year. The managed fiscal balance excluding funds also posted a deficit of 112 trillion won, doubling the deficit compared to 2019. The National Settlement Report will be submitted to the National Assembly by the end of May after undergoing an audit by the Board of Audit and Inspection in accordance with the National Finance Act.