Credit: Public domain.
On August 25, the Ministry of Strategy and Finance 기획재정부 and the Bank of Korea 한국은행 announced that as of 2Q 2024, the total of government and privately held debt exceeded KRW 3 quadrillion (USD 2.3t), or 127% of the country’s 2023 gross domestic product - a level of debt never before seen in South Korea. Much of the increase came from government debt, which grew from KRW 898t in 2Q 2021 to KRW 1.15q in 2Q 2024, an increase of 27.6% in three years. Private debt grew from KRW 1.81q to KRW 1.90q over the same period.
South Korea’s plummeting tax receipts are largely responsible for the growth in government-held debt. (See previous coverage, “Tax Receipts Plummet.”) For two years in a row, the Yoon Suk-yeol 윤석열 administration significantly overestimated the expected tax receipt while pursuing tax cuts, only to make up the shortfall by issuing more debt. With little excess capacity for consumption, the South Korean economy is likely to remain sluggish: the Bank of Korea has lowered GDP growth projections for 2024 by 0.1, to 2.4%.