South Korea’s Public Debt Hits Record High Amid Slowing Revenue and Rising Spending

Economic

Summary:

As of May 2025, South Korea's national debt has reached a historic high of 1,217.8 trillion won, putting increasing pressure on the government’s fiscal policy. Despite a slight increase in revenue,...

South Korea’s National Debt Surpasses 1,200 Trillion Won for the First Time

According to the Ministry of Economy and Finance, South Korea’s central government debt stood at 1,217.8 trillion won (approximately USD 886.6 billion) in May 2025, marking the first time it has crossed the 1,200 trillion won threshold. This represents a monthly increase of 19.9 trillion won and a year-to-date surge of 61.7 trillion won.

This ballooning debt comes amid slowing revenue growth and aggressive government spending to stimulate the economy. The current debt level is now just 28.3 trillion won shy of the government’s full-year forecast of 1,246.1 trillion won, made after the first supplementary budget. With a second budget already passed in July, the finance ministry now expects the debt to reach 1,267.2 trillion won by year-end. Including local government debt, the total national debt is projected to hit 1,301.9 trillion won.

Revenue Growth Stalls While Expenditures Surge

From January to May, government revenue totaled 279.8 trillion won, up 21.6 trillion won from the same period in 2024. However, the collection rate slowed slightly, with only 42.9% of annual targets achieved, compared to 43.4% last year.

Meanwhile, government expenditure reached 315.3 trillion won, an increase of 4.9 trillion won year-on-year. Of the 241.1 trillion won allocated to fast-tracked projects, 139 trillion won (57.7%) was already disbursed by May, signaling a continued focus on economic stimulus.

Rising Fiscal Risk Amid Political and Economic Uncertainty

This record-high debt also coincides with heightened political tension, following the second arrest of former President Yoon Suk Yeol, and growing global concerns over public debt burdens. With the global interest rate cycle potentially reversing, South Korea may face higher borrowing costs, further pressuring fiscal sustainability.

The situation underscores the mounting risk that government spending, if left unchecked, could deepen the budget deficit and crowd out investment in long-term development.

A Delicate Balancing Act

With the debt already nearing its full-year forecast just five months into 2025, the government is walking a fine line. If revenue continues to slow and borrowing remains high, the risk of fiscal imbalance will grow, threatening economic stability.

In the second half of the year, policymakers must weigh their choices carefully whether to continue stimulating growth at the cost of ballooning debt or begin tightening fiscal policy amid uncertain global conditions. Either path will shape South Korea’s economic resilience in the years ahead.

Source: Chosun Daily

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