By early 2025, South Korea faced unprecedented fiscal pressures due to its rapidly aging population and declining birth rates. To sustain long-term productive capacity, the government proposed a massive expansion of public investment in robotic automation, childcare facilities, and retraining programs, funded entirely through sovereign bond issuance. Critics warned that South Korea's national debt, historically stable at around 45% of GDP, could rapidly approach 85%, risking credit rating downgrades and crowding out private tech investment. However, proponents argued that without this public investment, a severe negative output gap would permanently damage potential growth. In contrast, Italy, with a national debt-to-GDP ratio exceeding 140%, continued to successfully roll over its debt at manageable yields, albeit heavily influenced by European Central Bank monetary policy and structural Eurozone constraints.
Using the information provided, evaluate whether an increase in national debt will harm an economy.