IMF lowers S. Korea's gov't debt forecasts on improved tax revenue prospects

On October 14, the International Monetary Fund (IMF) reduced its projections for South Korea's government debt-to-GDP ratio through 2031, citing robust economic growth and improved revenue prospects, according to the budget ministry. The IMF's Fiscal Monitor report stated that South Korea's government debt-to-GDP ratio is expected to reach 46.1% this year, with projections indicating it will remain in the mid-40% to low-50% range through 2031.

This marks an 8.3 percentage point decrease from the April forecast. The 2026 projection is also set to decrease by 11.8 percentage points, reaching 51.3% in 2031. The IMF's projection represents approximately 37% of the Group of Seven's average debt-to-GDP ratio of 123.6% and 43% of the average for 38 advanced economies. The Ministry of Planning and Budget noted that the IMF's assessment reflects South Korea's efforts to foster a positive feedback loop where expansionary fiscal policy drives economic growth, which subsequently generates higher tax revenues.

The IMF highlighted South Korea's impressive GDP growth, coupled with potential for improved revenue conditions through 2030. South Korea has pledged to continue proactive investment to enhance its growth potential and ensure fiscal sustainability, creating a virtuous cycle between fiscal policy and economic growth. Earlier this week, the IMF had raised its 2026 growth forecast for South Korea to 3.3%, up 0.7 percentage points from its July projection, largely due to strong semiconductor exports offsetting the economic fallout from the Middle East conflict.

The 2026 Annual Meetings of the IMF and the World Bank Group commenced in Bangkok on Monday and will conclude on Sunday.