The Korea Herald


IMF sees Korea's debt will drop to pre-crisis level in 2012


Published : Oct. 23, 2011 - 14:26

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SEOUL, Oct. 23 (Yonhap) -- The International Monetary Fund (MF) predicts South Korea's national debt is expected to fall to the level of before the 2008 global financial crisis in 2012, the finance ministry said Sunday.

The ratio of South Korea's national debt to its gross domestic product (GDP) will likely drop to 30 percent next year from this year's estimated 32 percent, the ministry said, citing a report from the global lending agency.

The percentage of national debt to GDP was 30.7 percent in 2007, a year before the global financial turmoil erupted following the collapse of Lehman Brothers.

The figure is expected to drop further to 26 percent in 2014 and 22.2 percent two years later, according to the IMF report.

The IMF forecasts are lower than the ministry's own projections.  In its fiscal management plan for the 2012-15 period, the ministry predicted the ratio to reach 32.8 percent in 2012 and29.6 percent in 2014.

The report also showed that the debt-to-GDP ratio for advanced economies would rise from 73.4 percent in 2007 to 102.9 percent next year, 108.7 percent in 2014 and 109.4 percent in 2016.

But the comparable figure for emerging countries is forecast to reach 36 percent in 2012, close to the pre-crisis level of 35.9 percent, and decline to 33 percent in 2014 and 30.9 percent in 2016.

The report warned that the world should brace for the spread of Europe's fiscal crisis, given a delay in the establishment of a mechanism to resolve the crisis.

In order to regain market confidence, nations should continue to push for fiscal soundness, craft measures to promote economic growth and establish a crisis management system, the report pointed out.