debt-to-GDP ratio-forecast
S. Korea's debt-to-GDP ratio projected to soar to 156.3 pct by 2065: finance ministry
By Kim Han-joo
SEOUL, Sept. 3 (Yonhap) -- South Korea's national debt is projected to climb to over 150 percent of its gross domestic product (GDP) by 2065 should the current trends of declining population and slowing economic growth continue, the finance ministry said Wednesday.
According to the Ministry of Economy and Finance, the country's debt-to-GDP ratio is estimated to rise to 51.6 percent in 2026 from 49.1 percent this year and further climb to 58 percent in 2029.
At the projected rate, it will reach 156.3 percent by 2065, the ministry said in its third and latest long-term fiscal outlook that follows its first two reports published in 2015 and 2020.
The national 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 in expanding expenditures.
The ministry emphasized that the purpose of the projection is not to predict the exact debt level in 40 years, but rather to warn of fiscal risks if no structural reforms are implemented.
Many believe national debt may begin to negatively affect the country's sovereign credit rating once the debt-to-GDP ratio nears 60 percent.
The ministry said modest fiscal discipline, such as reducing 5 percent of discretionary spending increases annually for the next 20 years, could lower the ratio by 6 percentage points by 2065.
The ministry added even minor adjustments can have significant cumulative effects over the long term, meaning that any changes in variables, such as responding to low birth rates or tax revenues, could significantly alter the long-term outlook.
"Depending on future structural reforms and policy responses, it is possible to change the trajectory of national debt and ensure fiscal sustainability," a ministry official said.
The latest estimate is broadly in line with estimates by other major institutions.
The state-run think tank, the Korea Development Institute, earlier projected the national debt-to-GDP ratio to reach 144.8 percent by 2060 under similar assumptions.
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