IMF Projects South Korea's Government Debt Ratio at 46.1% This Year, Down 8.3 Percentage Points
The International Monetary Fund (IMF) lowered its forecast for South Korea's government debt ratio by 8.3 percentage points from six months ago. The revision reflects GDP growth and the possibility of improved revenue conditions.
According to the IMF and the Ministry of Planning and Budget on Oct. 14, the IMF projected in its Fiscal Monitor report, released that day, that South Korea's general government debt (D2) ratio would be 46.1% this year. That is 8.3 percentage points below the IMF's previous forecast of 54.4%, released in April. The figure is the 25th highest among 38 advanced economies, but remains well below the G7 average of 123.6% and the average of 107.6% for the 38 advanced economies.
The IMF revised its forecast, projecting that South Korea's D2 ratio would remain in the 40% range (49.5%) through 2029 and would not enter the 50% range until 2030 (50.5%). In its forecast released in April, the IMF had expected the ratio to exceed 60%, reaching 60.1% in 2029.
The IMF lowered its forecast for the D2 ratio based on higher GDP growth and the possibility of improved revenue conditions through 2030. In its October World Economic Outlook, released on Oct. 13, the IMF projected South Korea's real GDP growth this year at 3.3%, up 0.7 percentage points from its July forecast.
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The Ministry of Planning and Budget said, "This can be seen as reflecting in the improved medium-term fiscal outlook a 'virtuous cycle between fiscal policy and growth,' in which expansionary fiscal policy supports economic growth, and economic growth broadens the revenue base and strengthens fiscal sustainability." It added, "Not only the IMF but also the Organisation for Economic Co-operation and Development (OECD), credit rating agencies such as Fitch and Moody's, and overseas media have continued to give positive assessments of South Korea's fiscal situation and proactive fiscal management. The government will continue to support a virtuous cycle between fiscal policy and growth."
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