The International Monetary Fund has sharply lowered its forecast for South Korea's general government debt as a share of gross domestic product. The projection for this year fell 8.3 percentage points from April, while the 2031 outlook dropped 11.8 percentage points. The government said economic growth has broadened the tax base, improving fiscal sustainability.
The IMF projected South Korea's general government debt at 46.1% of GDP this year in the October edition of its Fiscal Monitor released on the 14th, according to the Ministry of Planning and Budget. That is 8.3 percentage points below the April forecast of 54.4%. The 2027 projection was also cut by 9.0 percentage points to 47.6% from 56.6%.
The downward revisions were larger for the medium term. The IMF put South Korea's general government debt ratio at 51.3% in 2031, down 11.8 percentage points from the April forecast of 63.1%. The fund expects the country's debt ratio to be kept between the mid-40% and low-50% range through 2031, the end of the forecast period.
South Korea's debt ratio also remains low compared with other advanced economies. The IMF put the average general government debt ratio for advanced economies at 107.6% this year and the average for the Group of Seven at 123.6%. South Korea's projected 46.1% is about 43% of the advanced economy average and about 37% of the G7 average. Even so, the country's debt ratio is forecast to climb 5.2 percentage points, from 46.1% in 2026 to 51.3% in 2031.
The IMF cited strong GDP growth and the potential for improved revenue conditions through 2030 as reasons for the revision. An official at the Ministry of Planning and Budget said the change reflects "a virtuous cycle of fiscal policy and growth, in which active fiscal management supports economic growth and the resulting expansion of the revenue base strengthens fiscal sustainability," now built into the medium-term fiscal outlook.
International organizations and credit rating agencies have also offered favorable assessments of South Korea's fiscal management. Fitch said in September that the country's fiscal performance had improved far more than expected and that its government debt path was stable. Moody's said South Korea's budget proposal for next year pursues sustainable public finances while channeling excess tax revenue into future growth, seeking a balance between fiscal soundness and expansion.
The government said it will continue to pursue both investment that raises growth potential and fiscal sustainability. "We will support a rebound in the potential growth rate through bold investment and build a structure in which investment in the future leads to growth and a broader revenue base," the ministry official said.