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Korea's household debt to GDP ratio at world's second highest: data

Published: 16 Mar. 2025, 18:22

This March 2, 2024, file photo shows a sign about loan programs in front of a bank in Seoul. [YONHAP]

Korea's household debt-to-GDP ratio was the second highest among major nations, following Canada, amid growing concerns about rising household borrowing amid weak growth and domestic demand, data showed Sunday.

The debt-to-GDP ratio for Korea came to 91.7 percent in the fourth quarter of 2024, which marked the second highest among 38 major nations, according to the data from the Institute of International Finance (IIF).

Canada topped the list with 100.6 percent, and Thailand came in third with 92.4 percent, followed by Hong Kong with 93.2 percent, Britain with 78.1 percent and the United States with 71.9 percent, the report showed.

The average global ratio came to 60.3 percent.

In February, household loans extended by Korean banks rose for the first time in three months to 1,143.7 trillion won ($787.34 billion) amid rising housing prices in the affluent districts of southern Seoul following state deregulatory moves.

Last year, financial authorities pressed major lenders to implement tight lending rules to rein in surging household debt and rising home prices.

But banks eased some of the regulations at the beginning of the year while demand for loans went up during the season for moving.

Also contributing to the surge in household debt was the Seoul municipal government's easing of the so-called land transaction permission zone initiative imposed in some areas of Seoul's Gangnam, Seocho and Songpa districts last month, which caused a marked increase in real estate prices there and in adjacent regions.

The project requires state permission to buy or sell homes in the designated areas. It came into force in 2020 in an effort to curb property speculation and soaring home prices.

Bank of Korea (BOK) Gov. Rhee Chang-yong has stressed that the government aims to lower the ratio gradually to the 80 percent level, as excessive household borrowing could affect financial stability and economic growth.

Presenting a gloomier outlook for economic growth for 2025, the BOK last week slashed the benchmark interest rate by a quarter percentage point. It has hinted at up to two additional cuts this year to shore up growth.

“We've seen an increase in home transactions in Seoul and the surrounding Gyeonggi regions recently,” a BOK official said. “Given the situation, household debt is feared to grow further in the coming months.”