Korea Records Household Debt Higher Than GDP in Q1: DONG-A ILBO

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South Korea became the only country among 36 major countries whose household debt exceeded gross domestic product (GDP) in the first quarter of the year. Its rate of increase in corporate debt is the second fastest in the same group. The country’s private sector debt level hit a record high of 4.5 trillion won at the end of last year, raising fears that the debt could turn into a “detonator” that would threaten the its entire economy in the event of a rise in interest rates.

According to the Institute of International Finance (IIF) Global Debt Report, Korea’s first-quarter household debt-to-GDP ratio stood at 104.3%, the highest level among 36 countries in the world. the list, including the euro zone. Although the country’s actual household debt level trended downward over the period due to rising interest rates and tighter lending regulations, it continues to hover above above its GDP. The country’s household debt has been in first place since the second quarter of 2021. Lebanon (97.8%), Hong Kong (95.3%), Thailand (89.7%), Great 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 116.8%, up 5.5 percentage points year-on-year and growing at the second-fastest rate after Vietnam (10.9 percentage points). The interest rate is expected to rise this year, which would lead to a tightening of consumer power and investment level, with a heavier burden on household and business to pay interest.

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