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Korea records higher household debt than its GDP in Q1

Posted June. 07, 2022 07:49,   

Updated June. 07, 2022 07:49


South Korea has become the only country among 36 major nations to have its household debt exceeding the Gross Domestic Product (GDP) in the first quarter of the year. Its rate of corporate debt increase is the second fastest in the same group. The nation’s private sector debt level hit the all-time high at 4,500 trillion won at the end of last year, thus concerns are growing the debt would turn in to a ‘detonator’ that would threaten its entire economy when interest rate hikes.

According to Global Debt Report from the Institute of International Finance (IIF), Korea’s household-debt-to-GDP ratio in the first quarter stands at 104.3%, the highest level among 36 nations in the list including Eurozone. While the actual level of the country’s household debt has been on downward trend over the period due to rising interest rate and tougher loan regulation, it is still hovering over its GDP. The country’s household debt has ranked first since the second quarter of 2021. Lebanon (97.8%) Hong Kong (95.3%), Thailand (89.7%), Britain (83.9%), and the United States (76.1%) followed Korea, but all were below 100%.

Korea’s corporate debt to GDP ratio (excluding financial institutions) reached at 116.8%, up by 5.5 percentage points year-on-year and it is rising at second fastest rate after Vietnam (10.9 percentage points). Interest rate is expected to rise this year, which would lead to tightened consumer power and investment level with heavier burden on the household and company to pay for the interest.