Seoul, April 12 (IANS) South Korea’s national debt is projected to approach 60 per cent of its gross domestic product (GDP) by 2030, government data showed on Sunday, with the pace of increase widely expected to accelerate amid slowing growth and growing fiscal burdens.

The country’s debt-to-GDP ratio stood at 49 percent last year, up 3 percentage points from a year earlier, according to the national settlement report from the finance ministry, reports Yonhap news agency.

The increase marks the largest annual gain in five years, after a 5.7 percentage-point surge in 2020, when the economy was hit by the COVID-19 pandemic.

According to the national fiscal management plan submitted by the finance ministry to the parliament in September, the country’s debt-to-GDP ratio is forecast to rise from 51.6 percent in 2026 to 53.8 percent in 2027, 56.2 percent in 2028 and 58 percent in 2029.

Industry observers, however, believe the rise may further accelerate if GDP growth slows this year or fiscal pressures intensify.

Major economic organisations have lowered their growth forecasts for South Korea this year amid a prolonged conflict in the Middle East.

The Organization for Economic Cooperation and Development (OECD) projects the country’s economy will grow 1.7 percent this year, down 0.4 percentage point from its previous forecast of 2.1 percent issued in December.

In its report, the OECD noted that South Korea and Japan are highly dependent on imports for their energy supply from the Middle East, warning that potential supply disruptions caused by regional conflict could weigh on production activity.

The market observers also note that government forecasts for the debt-to-GDP ratio have not held in recent years.

In 2024, the government had forecast the ratio to reach 50.5 percent in 2028. The government revised up the figure last year by 5.7 percentage points to 56.2 percent, they said.

The debt-to-GDP ratio is widely used as a key indicator of a country’s fiscal health, with a lower ratio generally giving governments more flexibility to expand spending.

—IANS

na/