According to the most recent data produced by the Bank for International Settlements and released on Thursday, South Korea’s total debt- household, corporate, and government liabilities alike- grew by 4% within the third quarter of the past year, breaking its debt threshold past 6.2 quadrillion won ($4.24 trillion), which has now become 2.5 times the GDP of the country.
Thus, at the close of the third quarter, South Korea’s non-financial sector credit stood at 6,222 trillion won, an increase of 4.1% over the same period of the previous year and a rise of 0.9% over the last quarter of 2023.
Debt Growth Breakdown
The borrowings in the non-financial sector, commonly referred to as total debt, show the aggregation of borrowed amounts of households, enterprises, and governments excluding the financial sector. This measure is widely used by other countries around the world in their comparisons of countries’ debt levels.
South Korea first hit the 5,000 mark in early 2021 at the height of the economic troubles due to COVID-19. It has kept climbing all the way to close to the 6,000 mark by the end of the year.
- Among the total debt of 6,222 trillion won:
- Government debt consumed 18.3% but has been increasing fast.
- Government borrowing skyrocketed to 1,141 trillion won, a sharp increase of 11.8% yearly.
- Corporate loans were increased by 2.9% while that of households grew by 2.1%.
Reduction of Debt-to-GDP Ratio
Debt-wise, the increase notwithstanding, the overall debt-to-GDP ratio has kept on declining for South Korea. As of the third quarter of the previous year, the GDP was as high as 247.2%- the lowest ever since its peak in mid-2021. In the 252.9%, it peaked in mid-2023, it has now gone down in five consecutive quarters.
Breaking it down further:
Corporates have reduced their debt-GDP by four quarters consecutively; this is now at 111.1%.
Household debt to GDP percentage reduced to 90.7%, the lowest since early 2020.
Second-highest household Debt Among Major Economies
Meanwhile, a different report from the Institute of International Finance released on Sunday stated that South Korea has one of the highest household debt-to-GDP ratios of any major economy towards the end of 2024.
Household debt as a proportion of GDP in South Korea hit 91.7%, making it second only to Canada, which topped the list with 100.6%. This measure is considerably higher than the average for emerging markets (46%) and the global average (60.3%).
As rising debt levels continue, concerns about financial stability remain a primary topic in the minds of policymakers and economic analysts in the country.
