The government and some state-run companies were more than 1,200 trillion won ($1.1 trillion) in the red as of last year, with government debt growing almost twice as fast as a year earlier, central bank data revealed Tuesday.

The debt, borrowed by the central and local governments and nonfinancial state-run firms, tallied 1,208.8 trillion won at the end of 2014, up 76.3 trillion won, or 6.7 percent, year-on-year, the Bank of Korea reported. 

Of the total debt, the governments’ debt grew about 9.7 percent, or 70.6 trillion won, from 2013 to 2014. This is about twice as fast as the 5.5 percent increase from 2012 to 2013.

Debt owed by nonfinancial state firms grew just 1.4 percent, or 5.6 trillion won, during the same period, implying that growing government debt was largely to blame for raising the average debt level.

Theoretically, higher government spending can invigorate the market by increasing output and drive firms to employ more workers and pay higher wages, ultimately leading to higher real gross domestic product.

However, the country has shown slower GDP growth than expected, most visibly reflected in the BOK’s sudden key rate cut to a record-low 1.75 percent on March 12.

Earlier in the day, BOK Gov. Lee Ju-yeol fanned expectations of more rate cuts as he cited Federal Reserve Chair Janet Yellen’s remarks during a meeting with economic experts on the need to rely on economic data for policy decisions.

Back in January, the BOK lowered the country’s growth forecast for this year to 3.4 percent from 3.8 percent, in addition to slashing its inflation outlook to 1.9 percent from 2.4 percent.

By Chung Joo-won (joowonc@heraldcorp.com)