South Korea Household Debt, Fastest Growth Rate in the World

Among 37 Countries, Debt-to-GDP Ratio in Q2 at 104.2%
Increase of 6 Percentage Points

[Image source=Yonhap News]

[Asia Economy Reporter Jang Sehee] South Korea's household debt is the highest among approximately 40 major countries worldwide when considering the size of the national economy. The pace of household debt increase since the outbreak of COVID-19 was also the fastest in the world. The Bank of Korea's base interest rate hike at the end of this month is also almost certain.

According to the World Debt Report by the Institute of International Finance (IIF) on the 15th, as of the second quarter of this year, South Korea had the highest household debt-to-GDP ratio among 37 countries worldwide at 104.2%. Considering that Hong Kong, ranked second, has a household debt-to-GDP ratio of 92.0%, South Korea is the only country where household debt exceeds GDP. Additionally, South Korea's household debt ratio increased by 6.0 percentage points compared to the second quarter of last year (98.2%), marking the largest increase.

The IIF explained in the report, "Global household debt increased by $1.5 trillion in the first half of this year alongside rising housing prices," noting that this was particularly prominent in South Korea and Russia. The one-year government debt ratio growth rate (47.1%) ranked 22nd, placing it in the middle range. Professor Andonghyun of Seoul National University's Department of Economics analyzed, "The excessive increase in South Korea's household debt is largely due to rising housing prices," adding, "As financial imbalances emerge and inflation continues, the probability of the Bank of Korea raising the base interest rate this month is expected to exceed 90%."

Following future interest rate hikes, household interest burdens are expected to increase further. In its ‘Financial Stability Situation’ report last September, the Bank of Korea estimated that if the base interest rate rises by an additional 0.25 percentage points within the year following the 0.25 percentage point increase in August, the annual household interest burden would increase by 5.8 trillion won compared to the end of last year.

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