SEJONG, Sept. 2 (Yonhap) — South Korea needs to revive economic growth and bring changes to the nation’s creaking pension system in a bid to maintain fiscal soundness over the long haul, the finance ministry said Wednesday.

In a long-term fiscal outlook, the Ministry of Economy and Finance said if state expenditures keep pace with the country’s nominal growth rate in the coming decades, the size of state debt could rise to 81.1 percent of GDP in 2060, significantly higher than a 46.7 percent estimate for next year.

Such a development is expected as South Korea’s economy suffers from a rapidly aging population, which will reduce the country’s workforce and adversely affect investment and industrial output.

If a slowdown in economic growth eases on rising productivity, the ratio of national debt to GDP could rise to 64.5 percent in 2060, the ministry said.

“The government aims to keep the state debt-to-GDP ratio at a level of some 60 percent in 2060 throughout fiscal reform and securing of future growth engines,” the ministry said in a statement.

“There is a need to introduce fiscal rules and reform the social pension system,” it said.

According to the ministry, South Korea’s GDP growth will hover at around 2.3 percent annually from 2020 through 2030 before falling off to around 1.3 percent in the 2030s and dropping below the 1 percent annual mark from 2040 onward.

The country’s GDP growth is projected to average around 0.5 percent from 2050 to 2060.

The ministry, however, said that if spending is kept under control and there is a determined effort to regulate mandatory spending, as well as discretionary expenditures, government debt may actually dip to 55.1 percent of GDP in 2060.

Mandatory expenditures refer to outlays stipulated by law that cannot be changed. These generally encompass spending related to welfare and medicare.

On the issue of state pensions, the ministry’s report said that at the current pace, the fund will start to post a deficit in 2041 and completely dry up by 2060.

As of June, the size of assets held by the National Pension Service stood at over 750 trillion won (US$632.7 billion).

The ministry said broad social consensus needs to be reached on reforming the system.

The Korea Teachers’ Pension will also start posting a deficit in 2029 before being depleted in 2040, the ministry said.

Earlier this week, South Korea drafted next year’s expansionary budget of 555.8 trillion won, up 8.5 percent from this year, to help the economy recover from the coronavirus pandemic.

The ministry said it will sell as much as 172.9 trillion won of national debt next year, compared with 167 trillion won planned for this year.