Public Sector Debt Hits Record High of 1,588 Trillion Won... Surpasses 70% of GDP for the First Time

Debt (D3) in the public sector, including the government and non-financial public enterprises, exceeded 1,500 trillion won last year, marking an all-time high. The ratio of public sector debt to Gross Domestic Product (GDP) surpassed 70% for the first time.

According to the '2022 General Government Debt (D2) and Public Sector Debt (D3) Calculation' results announced by the Ministry of Economy and Finance on the 14th, public sector debt last year was 1,588.5 trillion won, an increase of 11.3% (161.4 trillion won) from the previous year (1,427.3 trillion won). The ratio of public sector debt to GDP rose to 73.5%, up 4.9 percentage points from 68.6% the previous year. Both the amount of public debt and the ratio to GDP recorded the highest levels since statistics began in 2011.

Public sector debt is calculated by adding the general government debt to the debts of non-financial public enterprises such as Korea Electric Power Corporation, Korea Land and Housing Corporation (LH), Korea Expressway Corporation, Seoul Housing Corporation (SH), and excluding internal transactions. Public sector debt first exceeded 1,000 trillion won (1,003.5 trillion won) in 2015, continued a moderate increase until 2019 (1,132.6 trillion won), and approached 1,500 trillion won in 2021. The ratio to GDP also surged from the high 60% range to exceed 70% for the first time, reaching 73.5%.

The Ministry of Economy and Finance analyzed that this increase in public sector debt was due to a 90.9 trillion won rise in general government debt (D2) last year. Han Ju-hee, Director of Fiscal Soundness at the Ministry, said, "This is due to a 2.2 percentage point increase in the general government debt ratio and a 2.8 percentage point increase in the debt ratio of non-financial public enterprises such as Korea Electric Power Corporation and Korea Gas Corporation."

Last year, debt of non-financial public enterprises reached 517.4 trillion won, with the ratio to GDP increasing by 2.8 percentage points from the previous year. Specifically, central non-financial public enterprises' debt was 481.4 trillion won, with a 2.9 percentage point increase in GDP ratio, while local non-financial public enterprises' debt was 50.9 trillion won, rising by 0.2 percentage points.

However, the Ministry noted that only eight countries in the Organisation for Economic Co-operation and Development (OECD) calculate public sector debt, limiting its use as an international comparative data.

General government debt last year was 1,157.2 trillion won, increasing by 90.9 trillion won from the previous year and surpassing 1,100 trillion won. General government debt is the sum of national debt (D1; 1,067.4 trillion won) of central and local governments plus the debt of non-profit public institutions. The ratio of general government debt to GDP was 53.5% last year, up 2.2 percentage points from 51.3% the previous year.