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Video Description

Type: KIHASA Policy Featurette

Topic: Even If the National Debt Increases, Is It Still Considered Sound Fiscal Policy?

Guest Speaker: Kim Woo-cheol, Professor, University of Seoul

Transcript

The concept of sound fiscal policy is quite broad, and it seems to vary depending on who you ask. But even I don't think that avoiding debt increases is necessarily sound fiscal management. It's more about managing debt at a sustainable pace―with a long-term perspective, of course. It's not about focusing on just one factor. If we can manage public debt at a pace that we can manage over the long term, while using public finances where they are needed, that is generally what people mean by sound fiscal policy. At the moment, our country's growth rate has slowed somewhat. Typically, the nominal economic growth rate is around 4-5%. Since our national debt is about 1,000 trillion won, if we increase the national debt by 4-5%, the debt-to-GDP ratio won’t change. In other words, our debt remains well within a manageable range. That is, as long as the debt-to-GDP ratio doesn't increase …