Lee Yeon-woo is a financial journalist at The Korea Times. Her wide range of reporting includes policies, macroeconomics, stock market, companies and even crypto. She is passionate about connecting the dots in Korean finance and making it easier for foreign nationals to understand. Based on her previous experience as a national reporter, she also has a keen interest in social issues within the sector, including gender equality and ESG. Your tips and insights are always appreciated. You can send them to yanu@koreatimes.co.kr.
Household debt-to-GDP ratio falls below 100% for first time in over 3 years
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By Lee Yeon-woo
Korea's household debt-to-GDP ratio fell below 100 percent for the first time in three and a half years, influenced by monetary tightening that began in 2021.
A ratio exceeding 100 percent indicates that total household debt surpasses the country's entire economic output.
According to the Institute of International Finance's recent report, titled "Global Debt Monitor: Navigating the New Normal," Korea's household debt-to-GDP ratio was the highest among the 34 countries studied as of the first quarter of 2024, at 98.9 percent. The eurozone was calculated as a single economy.
The ratio was followed by Hong Kong at 92.5 percent, Thailand at 91.8 percent, Britain at 78.1 percent and the United States at 71.8 percent.
Since the start of the COVID-19 pandemic in 2020, Korea has maintained its status as the country with the highest household debt-to-GDP ratio. It reached its peak at 105.5 percent in the first quarter of 2022.
However, this time, the ratio has dropped into the 90 percent range.
Compared to a year ago, the country's decrease in household debt was the fourth-largest at 2.6 percentage points, following Hong Kong at 3.8 percentage points, Britain at 3.5 percentage points and the U.S. at 2.8 percentage points.
This indicates that the Bank of Korea (BOK) has succeeded in its initial goal of reducing the debt ratio.
"When the household debt-to-GDP ratio surpasses 80 percent, it can potentially hinder economic growth and financial stability. Consequently, the goal is to gradually reduce this ratio, currently above 100 percent, down to 90 percent, and ultimately to 80 percent," BOK Gov. Rhee Chang-yong said last August.