[Fact Check] Moon Government Tops in National Debt Growth Speed, Growth Rate Lowest Since 1998

Our Paper's Analysis of Economic Indicators by Administration Since Kim Dae-jung Government
National Debt Growth Rate Dramatically Drops Under Yoon Government
Moon Government Increased Government Spending but Growth Remains Limited
Park Government's Inflation and MB Government's National Income Show Positive Indicators

The Yoon Suk-yeol administration has shown the slowest increase in national debt among all administrations since the Kim Dae-jung government. In particular, compared to the Moon Jae-in administration, the growth rates of both national debt and household debt have significantly decreased. This is attributed to the strong push for sound fiscal policies and the cooling down of the overheated real estate market. The economic growth rate has gradually declined over successive administrations due to a low-growth trend driven by low birth rates and an aging population.

On the 11th, Asia Economy investigated debt-related indicators by administration since the inauguration of the Kim Dae-jung government in 1998, finding that the Yoon Suk-yeol administration has the slowest debt growth rate among all administrations. In the first year of the Yoon administration last year, the national debt, combining national and local government debt, was 1,067.4 trillion won. Although this was a 9.96% increase from the previous year, in the first half of this year, when fiscal soundness measures were fully implemented, it rose only 1.49% to 1,083.4 trillion won. According to the Ministry of Economy and Finance's "2023-2027 National Fiscal Management Plan," national debt is expected to reach 1,346.7 trillion won by the end of 2026. If this forecast holds, the increase in national debt during the administration will be 279.3 trillion won (26.1%), the lowest growth rate on record.

During the Kim Dae-jung administration, national debt increased by 53.4 trillion won (66.4%), from 80.4 trillion won in 1998 to 133.8 trillion won in 2002. Under the Roh Moo-hyun administration, it rose by 133.4 trillion won (80.4%), from 165.8 trillion won in 2003 to 299.2 trillion won in 2007. Compared to conservative administrations like Lee Myung-bak and Park Geun-hye, the difference is also notable. Under Lee Myung-bak, debt grew by 134.1 trillion won (43.4%), from 309 trillion won in 2008 to 443.1 trillion won in 2012. Under Park Geun-hye, it increased by 137.1 trillion won (27.9%), from 489.8 trillion won in 2013 to 626.9 trillion won in 2016. The debt growth rate under the Yoon administration is slower than that of the Park Geun-hye administration, which did not complete its full term due to impeachment.

Especially compared to the Moon Jae-in administration, the debt growth rate has nearly halved. National debt was 660.2 trillion won in 2017, the first year of the Moon administration, and rose by 310.5 trillion won (47.0%) to 970.7 trillion won by the end of 2021. The debt growth rate was particularly steep in 2020 (17.0%) and 2021 (14.6%). This is attributed to the supplementary budgets exceeding 151 trillion won over the five-year term. In 2020, during the COVID-19 crisis, four supplementary budgets totaling 66.8 trillion won were enacted within one year.

The increase in the national debt-to-GDP ratio under the Yoon Suk-yeol administration is expected to moderate. The ratio, which was 49.4% at the end of last year, is projected to rise by only 3.1 percentage points to 52.5% by 2026. This contrasts sharply with the Moon Jae-in administration, where the ratio increased by 10.7 percentage points from 36% in 2017 to 46.7% in 2021. It is also lower than the increase during the Park Geun-hye administration, which rose 3.4 percentage points from 32.6% in 2013 to 36% in 2016.

Moon Administration Had the Largest Total Expenditure... Lowest Growth Rate

The Moon Jae-in administration recorded the lowest average economic growth rate among all administrations. The economic growth rates were ▲Kim Dae-jung administration 5.62% ▲Roh Moo-hyun administration 4.74% ▲Lee Myung-bak administration 3.34% ▲Park Geun-hye administration 3.03% ▲Moon Jae-in administration 2.38%. The growth rate in the first year of the Yoon Suk-yeol administration last year was 2.6%. These figures represent the average annual economic growth rate from the start to the end of each administration's term. Experts generally view this trend as natural, given that the Korean economy is maintaining a low-growth trajectory.

The central government's total expenditure was largest during the Moon Jae-in administration. It increased by 157.5 trillion won, from 400.5 trillion won in 2017 to 558 trillion won in 2021. During the same period, the share of government expenditure in GDP rose by 5.7 percentage points, from 21.9% to 27.6%. Including supplementary budgets, the total expenditure as a percentage of GDP approached 30% by the end of the Moon administration. This is a sharp increase compared to the Kim Dae-jung administration (20.2%), Roh Moo-hyun administration (20.3%), Lee Myung-bak administration (21.3%), and Park Geun-hye administration (21.3%), which maintained government expenditure at the low 20% range of GDP.

Although the Korean economy is transitioning to a low-growth structure typical of advanced countries due to low birth rates and aging, and despite the need to expand government spending amid the COVID-19 pandemic, the economic stimulus effect relative to government expenditure has been criticized as falling short of expectations. The government's total expenditure growth rate in 2019 (9.5%) was higher than in 2020 (9.1%), the first year of the pandemic, suggesting that the increase in spending cannot be entirely attributed to the COVID-19 crisis. Former President Moon Jae-in's statement last month that the increase in deficit spending during his term was "to protect public safety and livelihoods during the COVID-19 period" is partly correct but also partly inaccurate.

In contrast, President Yoon Suk-yeol has emphasized sound fiscal management since taking office, curbing government spending by lowering the budget growth rate. The total expenditure budget for next year is 656.9 trillion won, a 2.8% increase from this year's original budget, marking the lowest growth rate on record. This is about half the 5.1% increase in budget spending in the first year of the Yoon administration.

Lowest Inflation Rate Under Park Geun-hye Administration... External Factors Must Also Be Considered

The average consumer price inflation rate during each administration's term was lowest under the Park Geun-hye administration at 1.08% per year. The order is ▲Moon Jae-in administration 1.36% ▲Roh Moo-hyun administration 2.92% ▲Lee Myung-bak administration 3.32% ▲Kim Dae-jung administration 3.50% ▲Yoon Suk-yeol administration (5.1%, based on last year). According to these indicators, the average inflation rate during the Moon administration was lower than that of the Yoon administration.

However, inflation is influenced by a complex mix of domestic and international factors, making it difficult to judge solely by simple indicators. The sharp rise in prices since last year was largely driven by the prolonged Russia-Ukraine war, which caused a surge in international raw material prices. The inflationary pressure from global supply chain restructuring is a worldwide trend. In fact, the U.S. Consumer Price Index (CPI) surged from October 2021, reaching 9.1% in June last year, the highest in 40 years.

It is also necessary to consider that excessive liquidity supplied after the COVID-19 endemic worsened inflation. The global economy has entered a low-growth phase as central banks worldwide raised benchmark interest rates to curb inflation. This is evident in the increased inflation rate during the latter part of the Moon administration, with the annual inflation rate rising from 0.4% in 2019 and 0.5% in 2020 to 2.5% in 2021, a 2.0 percentage point increase in one year.

Moon Administration's Trade Surplus Larger Than Yoon's, But Reflects Global Trends

When simply comparing trade balances between the Moon Jae-in and Yoon Suk-yeol administrations, the Moon administration had a significantly larger surplus. During the Moon administration, the average quarterly trade surplus (Q2 2017 to Q1 2022) was $12.89 billion, whereas from the start of the Yoon administration to the first half of this year (Q2 2022 to Q2 2023), the average quarterly trade balance showed a deficit of $13.955 billion.

However, exports also declined for 14 consecutive months from December 2018 to January 2020 during the Moon administration. Similarly, under the Yoon administration, exports decreased for 12 consecutive months from October last year to last month. The main factors cited are China's economic slowdown and a downturn in the semiconductor market. Neighboring trading countries are experiencing similar situations; Japan and Taiwan have also seen export declines for over 10 months recently. Fortunately, the export decline rate last month was 4.4%, the lowest in the past year, raising expectations for a positive export turnaround this month. Former President Moon's statement that "almost all economic indicators, including export growth and trade surplus size, were better than now" misses the core of the issue.

Comparisons of per capita Gross National Income (GNI, in dollars) are also subject to interpretation. Based on average annual growth during the term, the Yoon administration saw a 7.7% decrease in per capita GNI last year, while the Moon administration experienced an average annual increase of 3.9% over five years. However, this excludes the impact of the won's depreciation due to the strong dollar in the latter half of last year, which reduced converted income. Additionally, when considering the total increase in national income, the Lee Myung-bak administration's average growth was 8 percentage points higher than that of the Moon administration.