South Korea’s Fiscal Sustainability under the Assumption of Inter-Korean Integration

Abstract

South Korea’s national debt as a percentage of GDP is substantially lower than the OECD average. Some have claimed, however, that, given the increasing welfare spending and the potential cost of unification, South Korea’s national debt, kept though it has been at low levels, may grow to an extent that could cause concern. Still others claim that Korea’s national debt has already gone beyond the level recommended by the international community. This brief attempts to verify whether South Korea’s fiscal state is robust enough to afford growing social expenditures and costs associated with inter-Korean integration.