This year, the national budget deficit is expected to reach around 100 trillion won for three consecutive years. While South Korea is responding to the new coronavirus infection (Corona 19) by releasing its finances, it has been found that small but powerful countries in Northern Europe have already turned to austerity.
According to the Ministry of Strategy and Finance and the financial information disclosure system ‘Open Finance’ on the 18th, the managed fiscal deficit from January to October of this year was tallied at 86.3 trillion won. The managed fiscal balance is an index excluding the four major security funds such as the national pension from the country’s integrated fiscal balance (total income – total expenditure) and shows the actual state of the country’s livelihood. Considering that the deficit has already reached 90 trillion won and that the deficit has increased by around 10 trillion won in December over the past three years (2019-2021), the managed fiscal deficit this year is also expected to exceed 100 trillion won. The managed fiscal deficit, which was 54.4 trillion won in 2019, was tallied at 112 trillion won in 2020 and 90.6 trillion won in 2021, and is expected to reach around 100 trillion won a year for the third consecutive year until this year.
The large increase in the national budget deficit is because the government has actively released its finances for the reason of responding to Corona 19. Korea’s general government debt (D2) for fiscal year 2021 was 1066.2 trillion won, up 121.1 trillion won (12.8%) from a year ago. The ratio of general government debt to gross domestic product (GDP) also rose by 9.4 percentage points over two years from 42.1% in 2020, the first year of Corona 19, to 51.5% last year.
Other countries have turned to fiscal austerity while governments continued fiscal expansion. Among the 35 countries classified as developed by the International Monetary Fund (IMF), the general government debt ratio of four small and powerful Nordic countries (Denmark, Iceland, Norway, and Sweden) decreased by 3.4 percentage points from 51.3% in 2020 to 47.9% last year.
Sejong = Reporter Choi Hye-ryeong herstory@donga.com