Signal Korea's managed fiscal deficit stays near 4 percent of GDP after the pandemic

Summary

Korea's managed fiscal balance deficit averaged only 1.4 percent of GDP in 2011 to 2019. Even after the COVID-19 crisis passed, the deficit has remained high at around 4 percent of GDP. The National Assembly Budget Office's long-term fiscal outlook projects national debt to exceed the size of the economy by 2050. The authors cite these figures as warning signs that fiscal soundness is already under strain before the full effect of lower potential growth arrives. They connect the elevated deficit to the risk of treating structural slowdown as a cyclical slump.