National Debt Tops 1,300 Trillion Won... Deficit Stays in 100 Trillion Won Range for Second Year

The deficit in the Managed Fiscal Balance, a key net fiscal indicator that reflects the health of public finances, has exceeded 100 trillion won. This is the fourth-largest shortfall on record. With the national accounts posting a deficit of over 100 trillion won for the second consecutive year, Government Debt has also surpassed 1,300 trillion won for the first time. By contrast, the Ministry of Economy and Finance (MOEF) argued that fiscal indicators related to the balance and debt, measured against Gross Domestic Product (GDP), have improved. The ministry also assessed that, given heightened domestic and external uncertainty such as the Middle East war, this is a time that calls for active fiscal policy rather than strict adherence to Fiscal Rules.
On the 6th, MOEF announced that the "2025 Fiscal Year National Settlement Report" had been reviewed and approved at a meeting of the State Council of South Korea.
Last year, total revenue came to 637.4 trillion won, while total expenditure reached 684.1 trillion won. As a result, the Integrated Fiscal Balance, which is total revenue minus total expenditure, recorded a deficit of 46.7 trillion won. When excluding the 57.5 trillion won surplus from social security funds, including the National Pension Service (NPS), Teachers' Pension, Workers' Compensation Insurance, and the Employment Insurance Fund, the Managed Fiscal Balance showed a deficit of 104.2 trillion won. This corresponds to a deficit of about 3.9% of GDP. The ratio has fallen into the 3% range, compared with last year’s budget projection of -4.2% and the 2024 settlement figure of -4.1%.
Government Debt also continued to rise. On a settlement basis for last year, it stood at 1,304.5 trillion won, up 129.4 trillion won from a year earlier. Government Debt per capita is estimated at about 25.24 million won. This is calculated by dividing the total Government Debt by the Ministry of Data and Statistics’ projected 2025 population of 51.685 million. The debt-to-GDP ratio is around 49%. Although this is 0.3 percentage points higher than the 2024 settlement figure of 46.0%, it is 0.1 percentage points lower than last year’s budget estimate of 49.1%. The fact that the fiscal balance and debt indicators improved relative to the budget means the actual increase was smaller than initially expected.
MOEF emphasized that what matters more than the absolute size of the deficit or debt is the "ratio to GDP," which reflects the country’s capacity to service its obligations. Hwang Soon-kwan, Director General for Treasury at MOEF, explained, "Last year was a period when domestic demand was dampened by the aftermath of martial law, while rapid changes in the U.S.-led trade environment and other shocks at home and abroad hit the economy simultaneously."
junjun@fnnews.com Choi Yong-jun Reporter