Debt-to-GDP hit all-time high in of 47.2% Q1: BOK

Korea's government debt-to-GDP ratio hit an all-time high in the first quarter of this year at 47.2%, raising concerns about the rapid pace of public debt growth as the government looks to inject more fiscal spending to revive economic momentum.

The Bank of Korea's main branch in Jung District, central Seoul, on Aug. 12 [YONHAP]

Korea's government debt-to-GDP ratio hit an all-time high in the first quarter of this year, raising concerns about the rapid pace of public debt growth as the government looks to inject more fiscal spending to revive economic momentum.

The ratio of government debt to GDP stood at 47.2 percent as of the end of the first quarter of 2025, according to the Bank for International Settlements (BIS) on Wednesday.

It marks the first time the ratio has surpassed 47 percent since the BIS began tracking the figure in 1990. The BIS calculates government debt by a narrow definition that excludes nonprofit public institutions and nonfinancial public corporations.

The ratio has been steadily rising since 2020 with the beginning of the Covid-19 pandemic, when it crossed the 40 percent mark for the first time in the first quarter of 2020 with 40.3 percent. Although it briefly dipped in the fourth quarter of 2024 to 43.6 percent, down from 45.1 percent the previous quarter, the upward trend quickly resumed this year.

The BIS estimated Korea’s total government debt at around 1.21 quadrillion won ($822.2 billion) as of the end of the first quarter — the highest amount ever in local currency terms. The debt figure first exceeded 1 quadrillion won in the first quarter of 2023 and has continued to climb since. However, in U.S. dollar terms, the debt amount is lower than the all-time high of $868.3 billion recorded in the third quarter of 2024, due to the won’s depreciation against the dollar during the first quarter.

A Hana Bank employee holds up 50,000 won ($36) bills at the bank's office in Jung District, central Seoul, on Feb. 19. [NEWS1]

While Korea’s debt-to-GDP ratio remains relatively low compared to other major economies, its rapid growth trajectory is drawing concern. GDP growth, which serves as the denominator in the ratio, is slowing due to structural factors like an aging population. Meanwhile, the government’s return to expansionary fiscal policy is likely to accelerate the pace of debt accumulation.

According to next year’s budget proposal, total government spending is set to increase by 8.1 percent — the highest growth rate since the Moon Jae-in administration. To cover expenditures beyond tax revenue, the government plans to issue 110 trillion won in deficit-financing bonds.

“Fiscal policy must play some role as the economy struggles,” Bank of Korea Gov. Rhee Chang-yong said in a lecture on Tuesday. “But it’s not desirable for national debt to continue rising indefinitely.”

Meanwhile, the BIS also reported that Korea’s total national debt — including government, household and corporate debt — reached a record 6.37 quadrillion won as of the end of the first quarter. However, household debt as a share of the GDP stood at 89.5 percent, the lowest level since the third quarter of 2019, which was 88.3 percent, just before the pandemic began.

This article was originally written in Korean and translated by a bilingual reporter with the help of generative AI tools. It was then edited by a native English-speaking editor. All AI-assisted translations are reviewed and refined by our newsroom. BY AHN HYO-SEONG [kim.minyoung5@joongang.co.kr]