Household debt to decline gradually due to demographic shifts: KDI

Kim Mee-roo, a research fellow at the Korea Development Institute, explains his recent research on the impact of demographic shifts on the household debt ratio at Government Complex Sejong, Tuesday. Yonhap

Korea’s household debt ratio is projected to decline by as much as 27.6 percentage points by 2070 compared to the level recorded in the first quarter of this year, driven by demographic shifts, according to the Korea Development Institute (KDI) on Tuesday.

In the report, KDI research fellow Kim Mee-roo stated that the household debt-to-GDP (gross domestic product) ratio is expected to peak within the next five years before entering a gradual downward trend.

Korea’s household debt, which has risen steadily over the past two decades, stood at 90.3 percent of the country’s GDP as of the first quarter of 2025.

The potential decline reflects demographic shifts. The number of younger households taking on debt to purchase housing is decreasing, while the proportion of older households accumulating financial assets, such as stocks, continues to rise.

According to the analysis, a 1 percentage point decrease in the proportion of adults aged 25 to 44, combined with a 1 percentage point increase in those aged 65 and older, could lead to a 1.8 percentage point drop in the household debt-to-GDP ratio.

Kim noted that by 2070, when Korea’s life expectancy is expected to rise from 84.5 to 90.9 years, this upward pressure could raise the debt ratio by 29.5 percentage points from its current level.

However, the demographic impact of a shrinking younger population is projected to have an even greater effect, reducing the ratio by 57.1 percentage points.

Taken together, these forces could result in a net decline of 27.6 percentage points in the household debt-to-GDP ratio by 2070, relative to the level recorded in the first quarter of this year.

Kim emphasized that stable household debt management will require not only financial policy reforms, but also nonfinancial measures, such as labor market flexibility and efforts to reduce asset inequality.

"Although life expectancy has increased, many retirees still work in low-paying, unstable jobs. This drives households to accumulate more assets, further contributing to rising debt," Kim said. "Adopting a flexible, performance- and role-based wage system could help ease this upward pressure on household debt."