National Debt Ratio Surging...Could Reach 60% of GDP by 2030

[The Financial News] The ratio of national debt to gross domestic product (GDP) is rising rapidly. With the global economy darkened by war in the Middle East, the debt ratio is expected to climb even faster unless fiscal burdens are reduced or the GDP denominator grows.
According to the 2025 fiscal year national settlement report released on the 12th, national debt (D1) last year reached a provisional 1,304.5 trillion won, up 129.4 trillion won from the previous year’s settlement. Data from the Ministry of Data and Statistics’ Korean Statistical Information Service (KOSIS) also show that last year’s increase in national debt was the largest since 1997, when official statistics began to be compiled under the current standard.
Because annual national debt has never decreased, the total amount sets a new record every year. However, there have been only three years in which it grew by more than 100 trillion won in a single year: 2020 (up 123.4 trillion won), 2021 (up 124.1 trillion won), and last year. The national debt growth rate last year was about 11%, the highest in four years since it reached 14.7% in 2021.
National debt refers to fixed obligations for which the government bears direct repayment responsibility, calculated as the sum of central government debt and net local government debt. The final figure is confirmed after local government accounts are closed in August.
As national debt expanded to a record level, the ratio of debt to GDP also surged. The national debt ratio rose from 46.0% in 2024 to 49.0% in 2025, an increase of 3.0 percentage points. This is the largest jump in five years, since the ratio spiked by 5.7 percentage points in 2020 amid the economic shock of the COVID-19 pandemic.
The national debt ratio had been increasing at a slower pace, rising 2.6 percentage points in 2021, 2.2 percentage points in 2022, and 0.9 percentage points in 2023, then even falling 0.8 percentage points in 2024. It rebounded sharply last year.
This has led to concerns that annual increases of more than 100 trillion won in national debt could become the new normal.
In its "2025–2029 National Fiscal Management Plan" submitted to the National Assembly of the Republic of Korea last September, the government projected that national debt would rise to 1,415.2 trillion won in 2026, 1,532.5 trillion won in 2027, 1,664.3 trillion won in 2028, and 1,788.9 trillion won in 2029. If these projections hold, national debt would increase by an average of about 121 trillion won per year from this year through 2029. Under this scenario, the national debt ratio is expected to expand to 51.6% in 2026, 53.8% in 2027, 56.2% in 2028, and 58.0% in 2029.
If GDP growth slows this year or fiscal burdens increase, the debt ratio could rise even faster. The Organisation for Economic Co-operation and Development (OECD) recently lowered its forecast for Korea’s growth rate this year by 0.4 percentage points, to around 1.7%, from the projection it released last December.
In its report, the OECD noted that Korea and Japan are highly dependent on energy imports from the Middle East and warned that energy supply disruptions caused by war in the region would weigh on production activity. The Bank of Korea (BOK) Monetary Policy Board has also stated that, due to rising energy prices and supply bottlenecks, growth is slowing more than previously expected and this year’s growth rate is likely to fall below its February forecast of 2.0%.
Growth projections are based on real GDP, which adjusts for inflation, rather than nominal GDP, which underpins the calculation of the national debt ratio. Even so, uncertainty stemming from the Middle East conflict is reflected in both.
Separately from the Middle East war, the International Monetary Fund (IMF) has assessed that Korea’s fiscal indicators will deteriorate more than initially expected. In a fiscal monitor report released last October, the IMF projected that Korea’s general government debt (D2) would reach 64.3% of GDP by 2030. This was a sharp upward revision of 5.1 percentage points from its April report, which had forecast 59.2%. D2 is calculated by adding the debt of central and local non-profit public institutions to D1.
Although Korea’s ratio is still far lower than that of Japan or Germany, the IMF actually revised down the figures for those two countries. Japan’s projected ratio was cut by 9.5 percentage points, from 231.7% to 222.2%, and Germany’s by 1.2 percentage points, from 74.8% to 73.6%. For the Republic of Singapore, the IMF raised the projection by 0.7 percentage points, from 178.0% to 178.7%.
kaya@fnnews.com Choi Hye-rim Reporter