Moody's Urges South Korea to Accelerate Fiscal Reform as Debt-to-GDP Ratio Approaches 60% (February 16, 2026)

The international credit rating agency Moody's has identified the pace at which South Korea's national debt ratio is rising as a risk factor in future sovereign rating assessments.

The agency expressed concern that the expansionary fiscal stance of the Lee Jae-myung administration, together with implementation costs arising from the Korea–U.S. investment agreement, could accelerate the pace of growth in government debt.

While a national debt-to-GDP ratio in the 50% range does not yet constitute a figure that would trigger an immediate downgrade, Moody's identified the ratio as a potential major risk should current trends persist over the long term, and called for fiscal reform.

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South Korea's fiscal deficit has continued without interruption since the 2008 global financial crisis, and since the pandemic in 2020 the country has become a chronic-deficit state in which the managed fiscal deficit has expanded to approximately 100 trillion won annually.

The national debt-to-GDP ratio has more than doubled from 25.7% in 2008 to 51.6% this year, and observers have long noted that the pace of debt accumulation is unprecedented.

Moody's noted that the fiscal stance has been expansionary over the past year and is expected to remain so at least through 2028, and explained that the debt burden has risen from 35% in 2019 to approximately 50% in 2025, converging from what had been a very strong initial position toward the advanced-economy average.

Should this upward trajectory in the debt ratio continue, Moody's projected that the ratio would exceed 60% of GDP by 2030.

The agency cited mandatory expenditures related to aging—such as pension and healthcare spending—along with national defense and security commitments, and the cost of fulfilling strategic obligations under the Korea–U.S. investment agreement as the primary drivers of debt growth.

Moody's pointedly noted that "the risks posed by the growing debt burden and contingent liabilities hinge on fiscal reform."

According to the February issue of the Monthly Fiscal Trends recently published by the Ministry of Planning and Budget, national tax revenues last year increased by 37.4 trillion won compared to the previous year; however,

expenditure growth exceeded the increase in revenues, making the issuance of deficit bonds unavoidable.

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