South Korea’s household debt highest among major economies: report
South Korea’s household debt topped 104 per cent of the gross domestic product, marking the highest level among 36 major economies, the Institute of International Finance (IIF)’s data showed.
The country’s household debt fell to 104.3 per cent of GDP in the first quarter of this year from 105 per cent in the same period a year earlier, still outrunning rivals by a large margin, according to the report by the Washington-based private financial industry association released on May 18.
Household debt levels for the other surveyed economies remained below 100 per cent. Lebanon borrowed 97.8 per cent of its GDP in the first quarter this year, making it the second-most indebted country in the group.
South Korea’s corporate debt, which was the seventh-highest, rose to the second-highest in the same period, from 111.3 per cent to 116.8 per cent. Only Vietnam outpaced Seoul at 140.2 per cent this year, from 129.2 per cent last year.
Debt owed by the South Korean government this year accounted for 44.6 per cent of GDP, compared with last year’s 45.8 per cent, in what is seen as a relatively moderate debt burden that puts the country at 25 out of 36 countries surveyed.
But the IIF said South Korea was one of three countries alongside Vietnam and Thailand to have reported the largest increase in net borrowing between 2021 and 2022.
Global debt levels in the same period showed a sign of decline, with EU countries showing palpable improvements.
Helping small businesses
A week earlier, South Korea’s National Assembly approved an extra budget aimed at helping small businesses hit hardest by Covid-19, despite previous support budgets and concerns over red-hot inflation seeping into the economy and shrinking growth.
The Bank of Korea, which lifted interest rates three times this year, is expected to back more hikes beginning as early as July, amid rising prices prompted by a global surge in materials and food costs. The consumer price index rose 5.4 per cent in May from the previous year, hitting a 14-year high.
“We have to look for a soft economic landing because we know from experience that growing debt could destabilise everything,” BOK governor Rhee Chang-yong said.
The South Korean government is expected to revise its growth and inflation forecasts for this year. An official at the Finance Ministry suggested raising the inflation target to a 4 per cent range – double the projection made last year – while slashing the growth estimate to a 2 per cent range from the current 3.1 per cent.
The Korea Herald
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