Korea's budgetary soundness ranked 4th among OECD members

Korea's budgetary soundness ranked 4th among OECD members

In the midst of one of the worst economic crises, governments worldwide took expansionary fiscal measures in 2009. The Korean government also disbursed a massive amount of funds in similar efforts. But the country's budgetary soundness has been favorably assessed, according to a recent report from the OECD.

According to the OECD's March report "Preparing Fiscal Consolidation," the "actual balance" of Korea’s budget (expressed in terms of percentage of nominal/potential GDP) in 2009 stood at -1.8, fourth healthiest after Norway (9.6), Switzerland (-0.7) and New Zealand (-1.2).


The average of OECD members' actual balance was tallied at -8.2.
Of the countries which recorded worse numbers in their actual balance in 2009 were many advanced nations which went through IMF bailout programs or had welfare-related budget problems, including Greece (-15.7) and Iceland (-12.7)

The figures for the United Kingdom, the United States, Spain and Japan were -12.6, -11.2, -9.6 and -7.4, respectively.
The report also forecast the post-crisis budget balances of the 16 G-20 nations, and Korea was among the only countries which are expected to record a surplus in 2010 and 2011.
Korea's projected budget surplus for 2011 is 1.1 percent, while budget balances of most of the other 15 OECD member nations were forecast to be under zero: China (-0.3 percent), Brazil (-1.8 percent), India (-8.2 percent), the United States (-9.4 percent) and the United Kingdom (-12.5 percent).

The report said that countries such as the United States, Japan, France and the United Kingdom, whose budget deficits are projected to exceed 6 percent of GDP in 2011, would have to consolidate by 6 percent of GDP or more in order to deliver a balanced budget by 2017.

Meanwhile, Korea's debt-to-GDP ratio is low compared to other advanced economies.

The Korea Institute of Public Finance said in its recent report that Korea’s debt ratio grew from 30.7 percent in late 2007 to 35.6 percent in 2009, but that the hike is forecast to slow and peak at 36.1 percent in 2010, before decreasing to 35.9 percent by 2013.

The average debt-to-GDP ratio of G-20 nations was as high as 62.4 percent in late 2007, which increased to 75.1 percent in 2009, and is likely to reach 85.9 percent in 2014, according to the institute.