Korea's Total Debt-to-GDP Ratio Rises Post-COVID...Contrasting G20 Decline

Compared to 2017, South Korea's National Total Debt Increased by 48.5%p in Q3 2021
2.5 Times the Average Increase of G20

[Image source=Getty Images]

[Asia Economy Reporter Park Sun-mi] Since the spread of COVID-19, South Korea's total national debt has increased at a faster rate compared to the Group of Twenty (G20) countries, prompting calls for measures such as enhancing growth capacity to curb debt growth.

On the 4th, the Korea Economic Research Institute analyzed statistics from the Bank for International Settlements (BIS) and reported that as of the third quarter of last year, South Korea's total national debt ratio stood at 266.3%, which is 1.4 percentage points lower than the G20 average of 267.7%. However, since 2017, South Korea's total national debt ratio growth rate was 48.5 percentage points, approximately 2.5 times higher than the G20 average increase of 19.6 percentage points.

In particular, while South Korea's total national debt ratio relative to gross domestic product (GDP) has continued to rise since 2017, the average for G20 countries has decreased since the onset of COVID-19 in 2020. The average total national debt ratio for G20 countries decreased by 23.8 percentage points from 2020 to the third quarter of 2021, whereas in South Korea, household, corporate, and government debts all increased after the COVID-19 pandemic, resulting in an 8.1 percentage point rise in the average total national debt ratio, indicating a need for debt risk management.

South Korea's household debt ratio relative to GDP surpassed 100% in 2020, rising from 89.4% in 2017 to 106.7% in the third quarter of 2021. The increase in South Korea's household debt ratio from 2017 to the third quarter of 2021 was 17.3 percentage points, about 5.8 times higher than the G20 average increase of 3 percentage points. Among the 43 countries reporting related statistics to the BIS, only four countries?China (13.5 percentage points), Hong Kong (21.6 percentage points), South Korea (17.3 percentage points), and Thailand (11.6 percentage points)?had household debt ratio increases exceeding 10 percentage points, with China and South Korea being the only G20 members.

Researcher Lim Dong-won stated, "Household debt is much higher than the G20 average compared to corporate debt, which is a serious situation. Unlike the international trend, it continues to increase even after COVID-19, exacerbating the suffering of ordinary citizens and self-employed individuals due to the pandemic."

He added, "Comprehensive debt risk management is necessary across household, corporate, and government sectors. If debt continues to increase excessively, it could lead to fiscal and financial crises," and emphasized, "Rather than artificial debt reduction, it is necessary to enhance growth capacity and incentivize income increases through regulatory reforms to reduce household and corporate debt, and to manage government debt soundly by introducing fiscal rules and other measures."

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