S. Korea's national debt surpasses 1,300 tln won in 2025

Lead

South Korea's national debt exceeded 1,300 trillion won (US$861.2 billion) in 2025, according to the finance ministry's national settlement report released in April. The debt-to-GDP ratio stood at 49 percent, up from 46 percent a year earlier, as reported by Yonhap News Agency.

The increase of 129.4 trillion won marks the largest annual gain in five years, following a 5.7 percentage-point surge in 2020 during the COVID-19 pandemic, according to the report.

Coverage Comparison

Reports from Yonhap News Agency, which provided the primary coverage of the finance ministry data, emphasized different aspects of the fiscal situation. One report highlighted the absolute size of the debt and the government's defense of its fiscal policy amid economic shocks. Another focused on the medium-term outlook, citing an International Monetary Fund (IMF) projection that the debt-to-GDP ratio would reach 61.7 percent by 2030, a slight improvement from previous estimates. A third, more critical piece described the deficit as "demanding fiscal discipline," using language such as "fiscal addiction" and "wartime budget."

The finance ministry's official position, as conveyed by senior official Hwang Soon-kywan, stressed that the government had prioritized active fiscal policy in response to what it called "simultaneous internal and external shocks," including the impact of the emergency martial law declaration and changing global trade conditions.

Key Claims

The national debt figure of 1,304.5 trillion won as of end-2025 was widely reported, with central government debt rising 127 trillion won to 1,268.1 trillion won and local government debt reaching 36.4 trillion won. The debt-to-GDP ratio of 49 percent was also consistently reported, though one analysis noted it remains below the record high of 50.4 percent set in 2023.

The managed fiscal balance posted a deficit of 104.2 trillion won, or 3.9 percent of GDP, narrowing slightly from 104.8 trillion won in 2024 and coming in 7.5 trillion won lower than originally projected. This marked the second consecutive year the deficit exceeded 100 trillion won, according to a critical analysis of the government's fiscal report.

The general government debt ratio, which includes liabilities of noncommercial public institutions, climbed to 56.7 percent of GDP, ranking 19th among 37 major economies—up sharply from 30th place in 2008, as reported in the same critical analysis.

In a separate development, the National Pension Service posted a record-high return of 18.8 percent in 2025, according to the ministry's report.

Perspectives

The government's view, as articulated by finance ministry officials, is that the debt increase must be understood in context. Hwang Soon-kywan defended the fiscal approach, saying the government "focused on active fiscal policy rather than pursuing a passive approach focused on cutting total spending." The ministry also pointed to positive signals: the IMF raised its nominal GDP growth forecasts for South Korea to 4.2 percent for 2025 and 4.7 percent for 2026, and the ministry attributed the improved medium-term debt outlook to its "performance-based and strategic fiscal management."

However, critics have raised concerns about the accuracy of tax revenue forecasts. One analysis noted that even with strong semiconductor exports, a discrepancy of about 25 trillion won emerged within just three months of the fiscal year, suggesting the gap is "difficult to attribute to a simple technical error." The same analysis warned that inaccurate projections could "distort budget planning, create room for additional spending and undermine policy credibility."

Market observers also pointed out that government debt-to-GDP forecasts have been consistently underestimated. In 2024, the government projected the ratio would reach 50.5 percent by 2028, but revised that up by 5.7 percentage points to 56.2 percent last year.

The OECD projects South Korea's economy will grow 1.7 percent this year, down from an earlier forecast of 2.1 percent, citing potential energy supply disruptions from the Middle East conflict. If growth slows more than expected, the debt trajectory could worsen, according to industry analysts.

The differing emphases in the coverage reflect a genuine tension in the data: while the absolute debt level and deficits are historically high, the medium-term projections have improved slightly, and the fiscal deficit has narrowed somewhat. Whether this represents prudent management or a warning sign depends largely on how one weighs the government's response to last year's economic shocks against longer-term sustainability concerns.