South Korea’s Debt-to-GDP Ratio to Reach 60% by 2030

South Korea’s national debt continues its rapid ascent, with recent government figures revealing a faster-than-anticipated increase. This trajectory puts the nation’s debt-to-GDP ratio firmly on course to reach 60 percent by 2030, signaling a growing fiscal challenge for the East Asian powerhouse.

According to the Finance Ministry’s latest national settlement report, national debt reached an unprecedented 1,304.5 trillion won ($878.2 billion) by the close of 2025. This represented a substantial 129.4 trillion won increase from the previous year, marking the largest annual surge recorded since data collection commenced in 1997.

This figure slightly exceeded the 1,301.9 trillion won projection outlined in the ministry’s 2025-2029 fiscal management plan, which was submitted to parliament in September.

Last year, the debt-to-GDP ratio settled at 49 percent, marginally shy of the government’s initial 49.1 percent forecast. Despite this slight miss, it still marked a significant 3 percentage-point rise from the year prior, representing the steepest annual increase witnessed since the 5.7 percentage-point leap in 2020.

Historically, only 1998 (3.6 percentage points) and 2005 (3.3 percentage points) saw larger single-year increases in the debt-to-GDP ratio.

These recent figures largely align with the government’s own projections, which anticipate continued acceleration in both national debt accumulation and the overall debt burden relative to the economy. The five-year fiscal plan projects national debt to climb by an average of 121 trillion won annually over the next four years, culminating in an estimated 1,788.9 trillion won by the end of 2029.

Further underscoring the trend, the plan forecasts the debt-to-GDP ratio to escalate to 51.6 percent this year, 53.8 percent in 2027, 56.2 percent in 2028, and 58 percent in 2029. This trajectory unmistakably positions South Korea to surpass a 60 percent debt-to-GDP ratio in 2030.

This accelerating pace represents a distinct departure from recent historical patterns. Excluding 2025, South Korea’s national debt saw increases exceeding 100 trillion won only during 2020 and 2021, a period characterized by significant government spending boosts in response to the COVID-19 pandemic. Conversely, the annual growth in the debt-to-GDP ratio had shown a steady deceleration over the preceding four years, dropping from 2.7 percentage points in 2021 to just 0.8 percentage point in 2024.

While the government’s latest spending initiatives might not immediately exacerbate headline fiscal indicators, they do little to fundamentally alter the broader upward trajectory of debt accumulation in South Korea.

In a related development, the National Assembly on Friday greenlit a 26.2 trillion won supplementary budget – the first of the year. This move by Seoul aims to buffer the Korean economy against the dual pressures of elevated oil prices and the ripple effects of the protracted conflict in the Middle East.

Under this revised plan, headline fiscal figures saw a modest improvement, yet the overarching fiscal picture for South Korea remained largely unchanged. With these additional outlays, the managed fiscal deficit is now projected at 107.6 trillion won, or 3.8 percent of Gross Domestic Product (GDP) – a slight reduction of 200 billion won and 0.1 percentage point from the initial budget proposal.

Factoring in the supplementary budget, the estimated year-end national debt stands at 1,412.8 trillion won. This is 1 trillion won lower than originally budgeted, positioning the debt-to-GDP ratio at 50.6 percent.

This deteriorating fiscal outlook for South Korea coincides with a period of slowing productivity and softer economic expansion. Leading global institutions are consistently revising down their economic forecasts for Asia’s fourth-largest economy. The OECD, in its March outlook, reduced its forecast by 0.4 percentage points from its prior estimate to a modest 1.7 percent growth rate. Concurrently, the Bank of Korea governor announced on Friday that the nation’s growth would likely fall below the central bank’s earlier February forecast of 2 percent.

The International Monetary Fund (IMF), in its October forecast, presented an even more somber assessment, projecting Korea’s debt-to-GDP ratio to reach 64.3 percent by 2030. This alarming figure represents an increase of over 5 percentage points from its estimate just six months prior, and more than 10 percentage points higher than the 53.4 percent projected for 2025. Such a rapid escalation marks the fastest projected increase among non-reserve currency economies globally, highlighting the severe challenges ahead for South Korea’s fiscal health.

jwc