South Korea’s Debt Growth Projects Fastest Among Developed Countries, Citing Super Aging Population

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South Korea’s debt-to-GDP ratio is projected to turn astatine the fastest gait among the world’s 35 astir precocious economies implicit the adjacent 5 years, and its imaginable GDP maturation complaint from 2030 to 2060 is besides projected to beryllium the lowest among the 38 OECD subordinate countries.

According to the International Monetary Fund’s (IMF) latest Fiscal Monitor report, South Korea’s government debt-to-GDP ratio is projected to reach 66.7 percent successful 2026, an summation of 15.4 percent points from the existent 51.3 percent. IMF regards it arsenic having the fastest indebtedness maturation complaint among the 35 astir developed countries listed.

Among the 35 astir developed countries, the Czech Republic ranks second, wherever its projected indebtedness maturation complaint is 8.7 percent, followed by Belgium with 6.3 percent, Singapore with 6 percent, and Hong Kong with 3.8 percent. South Korea is the lone state that exceeds 10 percent successful projected indebtedness growth.

In contrast, the mean debt-to-GDP ratio of the 35 astir developed countries implicit the adjacent 5 years volition autumn from 121.6% to 118.6%, a driblet of 3%. The Group of Seven (G7) countries proportionality consisting of the United States, the United Kingdom, France, Germany, Japan, Canada, and Italy volition autumn from 139.0% to 135.8%, a alteration of 3.2%.

Since this year, South Korea’s indebtedness ratio maturation seems to person diverged from astir different developed countries, according to the IMF report.

Most different developed countries began reducing the standard of their fiscal stimulus this twelvemonth and program for further simplification adjacent year. The mean debt-to-GDP ratio of the 35 astir precocious economies fell from 122.7 percent past twelvemonth to 121.6 percent this year, a alteration of 1.1 percent. And adjacent year’s projected 119.3 percent volition beryllium 2.3 percent little than this year.

Fiscal stimulus refers to argumentation measures undertaken by a authorities that typically trim taxes oregon regulations—or summation authorities spending—in bid to boost economical activity.

On the contrary, South Korea’s indebtedness ratio is projected to emergence from 47.9 percent past twelvemonth to 51.3 percent this twelvemonth and 55.1 percent adjacent year, expanding 3.4 and 3.8 percent points, respectively. This twelvemonth alone, South Korea has compiled 2 rounds of supplementary budgets, a standard of $12.4 cardinal and $29.17 billion. Next year, its fund expenditure volition summation by 8.3 percent, which is lone 0.6 percent points little than this year’s 8.9 percent.

South Korean nationalist sentiment believes the superior reasons for the accelerated emergence successful nationalist indebtedness are the debased commencement rates and aging population, starring to a alteration successful the payer colonisation and an summation successful the beneficiary population. In addition, owed to the Chinese Communist Party (CCP) virus pandemic, South Korea has not been capable to instrumentality fiscal austerity policies similar different developed nations.

Potential (GDP) Growth Projections

According to a caller forecast from Organisation for Economic Co-operation and Development (OECD), if the presumption quo is maintained with nary argumentation changes, South Korea’s imaginable (GDP) maturation for 2030 to 2060 was estimated astatine 0.8 percent.

Potential maturation refers to the complaint of maturation that an system tin prolong implicit the mean word without generating excess inflation.

According to the OECD report, South Korea’s yearly mean imaginable (GDP) maturation dropped from 3.8 percent from 2000 to 2007 to 2.8 percent from 2007 to 2020. And it is forecasted to driblet to 1.9 percent from 2020 to 2030 and 0.8 percent from 2030 to 2060, little than that of the OECD average.

The yearly mean imaginable (GDP) maturation from 2030 to 2060 of OECD’s 38 subordinate countries is projected to beryllium 1.1 percent. Among the countries, South Korea and Canada are tied for the bottommost spot astatine 0.8 percent, little than the 1.0 percent mean of the G20 developed state radical to which South Korea belongs. From 2030 to 2060, the yearly mean imaginable (GDP) maturation rates successful the United States and Japan are 1.0 and 1.1 percent, respectively.

Aging Population and Low Birth Rate

According to Statistics Korea, the aged 65 and implicit colonisation successful South Korea was 14.9 percent successful 2019, and it is projected to scope 37.0 percent successful 2045, surpassing Japan’s projected 36.7 percent. By 2067, the aged 65 and implicit colonisation is projected to scope 46.5 percent, making South Korea the fastest aging state globally.

At the aforesaid time, South Korea’s moving population, aged 15 to 64, volition driblet from 72.7 percent successful 2019 to a projected 45.4 percent successful 2067.

The OECD study suggested that aft the diminution and rebound [of the GDP maturation trend] caused by [the CCP microorganism pandemic], maturation volition gradually dilatory again successful some OECD and G20 processing countries. And the declined growths are expected to proceed to weaken implicit the adjacent fewer decades without argumentation change.

The study besides stated that slowing economical maturation is besides a origin that threatens fiscal soundness. And it is due to the fact that the government’s taxation gross basal is weakening portion payment spending increases owed to an aging population. OECD recommended reassessing the semipermanent fiscal soundness, taking into relationship higher levels of nationalist indebtedness and slowing maturation to guarantee the economical betterment has a steadfast foothold.

Lisa Bian

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