An independent research report showed the South Korean economy to have the highest ratio of household debt to gross domestic product (GDP) among major economies in the world.
Such a situation could crumple consumption in the country and weigh on the economy in the near future.
According to the report by the Institute of International Finance, the country’s household debt as of end-June this year stood at 104.2 percent of its GDP, the highest among 37 economies.
Hong Kong came next with 92 percent. This was followed by Britain with 89.4 percent, the United States with 79.2 percent, Thailand with 77.5 percent, Malaysia with 73.4 percent and Japan with 63.9 percent.
The country’s ratio was up 6 percentage points from a year earlier. It is also the only country among the above economies that has more household debt than its economic size.
According to reports, the country has been striving to rein in household debt, which has grown at a faster clip since 2020 over nationwide efforts to stimulate the economy from the COVID-19 pandemic.
According to Bank of Korea, household credit in June reached a record high of 1,805.9 trillion won (US$1.53 trillion), up 41.2 trillion won from three months earlier. While household debt also increased 7.9 percent on-year in 2020, more than a 4.1 percent hike than the previous year. During the second quarter of this year, the debt rose 10.3 percent on-year.
The report also showed the country’s companies’ debt ratio rising to 115 percent in the second quarter of the year, the fifth highest among those economies. This was followed by Hong Kong, with the highest ratio with 247 percent, China with 157.6 percent and Singapore with 139.3 percent.
The country’s state debt-to-GDP ratio came to 47.1 percent, 26th among the nations.
In otherwise positive news, Statistics Korea also reported the country’s rice output to rise for the first time in six years. The same has been attributed to favorable weather conditions and an increase in the cultivation area.
The data showed rice production to reach 3.88 million tons in 2021, up 10.7 percent from a record low of 3.51 million tons the previous year.