The South Korean government will keep the ratio of national debt against the gross domestic product at 45 percent or lower from next year as part of its long-term plan to maintain sound fiscal status, the finance ministry here said Tuesday.

It will also control the balance of government income and expenditures at a ratio of 3 percent or lower to the GDP, according to the Ministry of Strategy and Finance.


The ministry said it has drawn up the new state budget management act in order to deal with the national finances more effectively in the face of low economic growth and an aging population.

"We've come up with the new guideline to show our will to manage the national budget in a stricter way," Vice Finance Minister Song Eon-seog told reporters at a briefing.

"We also set up the ceiling a little higher than the current level to give us more room to take aggressive fiscal intervention when the economic situation gets worse."

South Korea's economy seems to have entered a low growth cycle, as its growth has hovered in the 3 percent range for years with a 3.3 percent expansion in 2015 and 2.8 percent growth in 2016.

Moreover, the number of economically active people is expected to decrease from 2017, after peaking at 37 million in 2016 due to a low birthrate and a rapidly aging population.

Under the law, the government has to comply with a debt-GDP ratio of 45 percent and the balance of the government budget-GDP ratio of 3 percent in any circumstances.

South Korea's national budget accounts for 40.1 percent of the GDP in 2016, with a balance ratio of 2.3 percent.

But the government can take more expansionary measures above the limit in some extraordinary cases such as a sudden economic slump or natural disasters, added the finance ministry.

The ministry said it will review the criteria every five years and make a revision if necessary. (Yonhap)