Korea‘s household debt still high but improving in Q423

[Photo by Yonhap]

South Korea’s household debt remained above 100 percent of the nation’s gross domestic product (GDP) in the fourth quarter of 2023, a level that was notable among major economies. But there were also signs of improvement with a substantial decrease compared to peers.

According to data from the Global Debt Monitor report released by the Institute of International Finance (IIF) on Sunday, Korea registered the highest household debt-to-GDP ratio at 100.1 percent as of the fourth quarter of 2023, the highest figure among 33 countries in the dataset (with the Eurozone consolidated as a single unit).

Following Korea, Hong Kong, Thailand, the United Kingdom, and the United States posted ratios of 93.3 percent, 91.6 percent, 78.5 percent, and 72.8 percent respectively. Korea has been at the top of the list with the highest global household debt ratio for nearly four years and is the only country where household debt exceeds national GDP.

[Graphics by Song ji-yoon]

Compared to a year ago, however, the decline in the country’s household debt ratio was the second largest among the 33 countries at 4.4 percentage points, dropping from 104.5 percent to 100.1 percent, following the United Kingdom which saw a decrease of 4.6 percentage points. Compared to the peak in the first quarter of 2022 when the figure was 105.5 percent, Korea’s household debt ratio decreased by 5.4 percentage points in the fourth quarter of 2023.

The latest data suggests that the country‘s household debt is stabilizing amid real estate market downturns and rising interest rates following a period of rapid escalation due to the Covid-19 pandemic and low interest rates.

Forecasts indicate that Korea’s household debt ratio could dip below 100 percent in 2024 if this trend persists, coupled with successful measures to curb the increase in household debt as targeted by financial authorities and banks.

Meanwhile, corporate debt in Korea remains high. The non-financial sector’s corporate debt-to-GDP ratio was the fourth highest among the surveyed countries at 125.2 percent as of the fourth quarter of 2024.