IMF Cuts South Korea Debt-Ratio Forecasts as Growth and Tax Outlook Improve

The International Monetary Fund has lowered its forecasts for South Korea’s government debt burden through 2031, reflecting stronger economic growth and an improved outlook for tax revenue.

The IMF’s latest Fiscal Monitor projects South Korea’s government gross debt at 46.1 percent of gross domestic product in 2026. That estimate is 8.3 percentage points below the institution’s April projection. The ratio is expected to remain in the mid-40 percent to low-50 percent range over the following years.

For 2031, the IMF now forecasts a debt-to-GDP ratio of 51.3 percent, a reduction of 11.8 percentage points from its April estimate. The revisions suggest that the fiscal outlook has improved materially compared with the assessment issued six months earlier.

South Korea’s projected 2026 ratio is also substantially below the averages cited for other advanced economies. The IMF put the Group of Seven average at 123.6 percent, making South Korea’s expected ratio about 37 percent of that level. The average for 38 advanced economies was projected at 107.6 percent, with South Korea’s figure equal to roughly 43 percent of that benchmark.

The Ministry of Planning and Budget attributed the improved assessment to a combination of robust growth and stronger revenue prospects. It said expansionary fiscal policy can support economic activity, which can then generate additional tax receipts and help reinforce fiscal capacity. According to the ministry, the IMF highlighted both South Korea’s growth performance and the prospect of better revenue conditions through 2030.

The revised debt outlook follows a separate upgrade to South Korea’s economic growth forecast. Earlier this week, the IMF raised its projection for the country’s 2026 growth to 3.3 percent, an increase of 0.7 percentage point from its July estimate. Strong semiconductor exports were cited as a key factor offsetting economic damage associated with the war in the Middle East.

The government said it would continue making proactive investments intended to strengthen long-term growth potential while maintaining fiscal sustainability. The challenge will be to preserve that balance as debt continues to rise in relation to GDP over the forecast period, even under the improved projections.

The new estimates were released as the 2026 annual meetings of the IMF and World Bank Group got underway in Bangkok. The meetings began Monday and are scheduled to continue through Sunday.