Acting president Choi says household debt remains relatively stable

Acting President Choi Sang-mok speaks during a meeting at the government complex in Seoul, in this photo provided by the finance ministy, Feb. 21. Yonhap

Acting President Choi Sang-mok said Friday that household debt has remained relatively stable in recent years despite economic challenges but called for new measures to manage it ahead of the upcoming interest rate meeting.

Choi made the remarks during a regular economic meeting attended by the Bank of Korea (BOK) governor and the heads of the Financial Services Commission and the Financial Supervisory Service.

Friday's meeting came as the central bank is set to hold its rate-setting meeting on Tuesday.

"To ensure that the household debt ratio stabilizes at a level that does not burden the national economy, which is considered at the 80 percent level, we must consistently manage household debt growth within the expected nominal gross domestic product (GDP) growth rate of 3.8 percent for 2025," Choi was quoted as telling the meeting, referring to the debt-to-GDP ratio.

Korea's household debt-to-GDP ratio had steadily increased for 17 years since 2004, reaching 98.7 percent by the end of 2021 and raising concerns for potential risks to the economy.

The ratio, however, has been on a downward trend for three consecutive years since 2022, reaching an estimated level of the early 90 percent range this year, close to the 89.6 percent level recorded in 2019.

Choi ordered the government to prepare and announce by the end of this month how it plans to manage the debt ratio this year.

The other participants at the meeting stressed the need to prevent household debt from rising again due to expectations of further interest rate cuts.

Last month, the BOK held its key rate unchanged at 3 percent in a surprise decision, following two rate cuts in the prior meetings in October and November, which marked the first back-to-back interest rate cuts since February 2009. (Yonhap)