Korea's Public Sector Debt-to-GDP Ratio Falls to 68%... First Decline in Six Years

2024 General Government and Public Sector Debt Aggregation Results
Public Sector Debt Ratio Falls by 1.5 Percentage Points to 68%
Total Public Sector Debt Surpasses 1,700 Trillion Won, Setting an All-Time High

Last year, the ratio of public sector and general government debt to gross domestic product (GDP) declined for the first time in six years since 2018. Public sector debt (D3) surpassed 1,700 trillion won, reaching an all-time high, and general government debt (D2) also approached 1,300 trillion won as fiscal burdens increased due to a rise in government bonds. However, the GDP grew at a faster pace than the increase in debt, resulting in a decrease in the debt-to-GDP ratio.

According to the "2024 Fiscal Year General Government and Public Sector Debt Aggregation Results" released by the Ministry of Economy and Finance on December 12, public sector debt last year stood at 1,738.6 trillion won, an increase of 65.3 trillion won from the previous year. The ratio of public sector debt to GDP fell by 1.5 percentage points to 68.0%. The public sector debt ratio had been steadily rising since 2019, but last year it decreased for the first time. It rose from 55.5% in 2019 to 62.2% in 2020 due to increased spending in response to COVID-19, then continued to climb to 64.2% in 2021, 68.4% in 2022, and 69.5% in 2023.

Debt statistics managed by the government are classified as: ▲National Debt (D1) ▲General Government Debt (D2) ▲Public Sector Debt (D3). D1 is the sum of central and local government debt and is used as a management indicator in government budget planning. D2 adds the debt of non-profit public institutions to D1 and is used as an international comparison standard. D3 includes the debt of non-financial public enterprises such as Korea Electric Power Corporation and serves as an indicator of the overall soundness of the public sector.

Within public sector debt, non-financial public enterprise debt last year reached 567.5 trillion won, an increase of 22.1 trillion won from the previous year. Korea Land & Housing Corporation (LH) saw its debt rise by 8.7 trillion won due to increased borrowing and bond issuance for the expansion of housing-related policy projects. Korea Expressway Corporation increased its debt by 3.2 trillion won through bond issuance to finance highway construction. Major public enterprises such as Korea Electric Power Corporation, power generation subsidiaries, and Korea Gas Corporation also contributed to the increase in debt through the issuance of debt securities and increased borrowing.

Cargo is piled up on a container ship docked at Busan Port. Photo by Jin-Hyung Kang aymsdream@

Last year, D2 stood at 1,270.8 trillion won, an increase of 53.5 trillion won from the previous year. The ratio to GDP was 49.7%, down 0.8 percentage points from the previous year (50.5%). The main driver of the D2 increase was the 52.4 trillion won rise in government bonds due to expanded fiscal demand. Including government bonds, the central government's accounting and fund debt reached 1,182.9 trillion won, up 54.6 trillion won from the previous year.

In addition, the debt of central government non-profit public institutions was 62 trillion won, an increase of 2.9 trillion won from the previous year. Korea Asset Management Corporation increased its debt by 2.2 trillion won through bond issuance to raise funds for purchasing non-performing loans from self-employed individuals and small businesses. Korea Rural Community Corporation increased its debt by 1.2 trillion won due to increased borrowing and bond issuance related to the Farmland Bank and industrial complex development projects.

Local government debt was 74.6 trillion won, an increase of 3.9 trillion won from the previous year. In particular, the accounting and fund debt of major metropolitan governments such as Busan, Seoul, and Gyeonggi increased. The debt of local non-profit public institutions rose by 300 billion won to 4.5 trillion won.

By debt characteristics, the proportion of long-term debt in D2 was 88.0%, fixed interest rate debt accounted for 99.2%, and domestic creditors made up 80.0%, indicating that most of the debt structure remains stable. In terms of composition, debt securities (including government bonds) totaled 1,045.5 trillion won, accounting for 82.3% of total D2 and increasing by 45.6 trillion won from the previous year.

A Ministry of Economy and Finance official explained, "The increase in D3 was due to a rise in non-financial public enterprise debt following the expansion of D2 policy projects."