Korean Economic Association: "Household Debt Management Should Focus on Stabilizing Housing Prices Rather Than Loan Regulations"

Nominal GDP to Household Debt Ratio 105%... Rapid Increase
Real Estate Policy Failure... Household Debt Rising

[Image source=Yonhap News]

[Asia Economy Reporter Jang Sehee] Economists pointed out that household debt increased due to the failure of the Moon Jae-in administration's real estate policies. They advised that stabilizing housing prices is more important than regulations such as loan suspensions to manage household debt.

The Korean Economic Association announced the results of an economic discussion survey with this content on the 13th. The survey was conducted from the 27th of last month to the 8th of this month, targeting 28 economists who are part of the association's economic discussion panel.

In response to the survey question, "How do you evaluate the household debt ratio compared to nominal Gross Domestic Product (GDP), which recorded 105% in the first quarter of this year?" 100% of respondents answered that it is at a high level.

Professor Kim Woo-chan of Korea University’s Business Administration Department emphasized, "It is a relatively very high level compared to other countries." He stated, "The household debt ratio compared to GDP is the 6th highest among 43 countries surveyed by BIS, and the debt service ratio (DSR) relative to income is also the 6th highest among those 43 countries."

Professor Kang Moon-sung of Korea University’s International Studies Department evaluated, "Although the debt ratio compared to financial assets is decreasing due to the stock market boom, it is necessary to manage household debt in preparation for an asset bubble collapse."

Professor Lee In-ho of Seoul National University’s Economics Department also emphasized, "Not only the size of household debt but also the rapid increase rate is problematic. Since the risk structure of assets accumulated using debt is concerning in many aspects, urgent measures are needed."

89% of respondents analyzed that household debt increased due to mortgage loans. As housing prices rose significantly, costs increased, leading people to borrow to cover these expenses.

Professor Heo Jeong of Sogang University’s Economics Department said, "The increase in housing costs is the cause," and evaluated, "It stems from the failure of government supply policies in the housing market over the past few years."

Meanwhile, 75% of respondents answered that interest rates should be raised to manage household debt.

Professor Kim Woo-chan of Korea University’s Business Administration Department emphasized, "Proactive interest rate hikes should be used to suppress household loan demand as much as possible. Delaying the timing of interest rate increases will make it more difficult to raise rates due to household debt." Additionally, Professor Lee Jong-hwa of Korea University’s Economics Department and Professor Emeritus Cho Jang-ok of Sogang University’s Economics Department added that while raising the base interest rate is necessary, the trend of household debt is not a critical factor in the current decision.

This content was produced with the assistance of AI translation services.