IMF Raises Concerns Over Pace of South Korean Government Debt Growth

The International Monetary Fund (IMF) expressed concern on the 16th over the pace at which the South Korean government's debt is increasing, according to its 'Fiscal Monitor' report. The report projects that by 2031, the South Korean government's total debt will reach 63.1% of the country's economic size (Gross Domestic Product, GDP). The IMF described South Korea's fiscal path as a 'significant increase,' a stronger assessment than the 'gradual rise' outlook in its November report.

In its November report, the IMF had stated that South Korea's government debt was projected to rise gradually from 48% of GDP in 2025 to 59% in 2030. The IMF also projected that both South Korea and Belgium would see their debt-to-GDP ratios increase significantly, with Belgium's ratio expected to exceed 122% and South Korea's to reach 63% by 2031. In contrast, Spain and Japan were analyzed to see their debt-to-GDP ratios fall by 10 to 14 percentage points by 2031.

The IMF estimated South Korea's government debt-to-GDP ratio for the years 2026 through 2031 as follows: 54.4% in 2026, 56.6% in 2027, 58.5% in 2028, 60.1% in 2029, 61.7% in 2030, and 63.1% in 2031. These figures are 2.3 to 2.6 percentage points lower annually than the projections made in October last year. The Ministry of Economy and Finance stated that these forecasts partially reflect the outcomes of performance-oriented and strategic fiscal management.

The IMF identified several major risk factors that could worsen fiscal conditions, including expenditure pressures due to the Middle East conflict, protectionism, changes in the structure of the government bond market favoring short-term debt, financial market risks related to AI, and demographic shifts. Regarding rising energy prices, the IMF recommended clearly defining beneficiaries and providing temporary support within a set scope for vulnerable groups. It also proposed establishing a clear, phased medium-term fiscal framework and rationalizing fiscal expenditures whose effectiveness is unclear to ensure fiscal sustainability.