Korea’s Debt Balloon
In the second quarter of this year, Korea’s debt owned by households, companies, and the government was almost 3.8 quadrillion won (US$3.5 trillion), three times the size of its GDP.
According to data announced by the Bank of Korea on September 22, as of the end of June the combined debt of households, non-profit organizations, non-financial enterprises, and the government was 3.74 quadrillion won (US$3.45 trillion), 289.8% of GDP (1.2906 quadrillion won, US$1.2004 trillion) from Q3 2012 to Q2 2013. The figure is the highest ever, even higher than the 285.2% at the height of the global economic crisis in the second quarter of 2009.
Debts of households, companies, and the government reached 1.1822 quadrillion won (US$1.0993 trillion), 2.0393 quadrillion won (US$1.8968 trillion), and 517.9 trillion won (US$481.7 billion), respectively.
The debt-to-gross domestic product (GDP) ratio stood at about 220% in 2003. But it rose to 236.5% at the end of 2006, 245.9% in 2007, and 273.7% in 2008. In 2012, it exceeded 280%.
The corporate debt-to-GDP ratio was up from 131.4% in Q2 2003 to 158.0% in Q2 2013. The corresponding figure for households jumped from 72.8% to 91.6% during the same period. The government debt-to-GDP ratio rose from 18.2% to 40.1%. Even though the figure for the government is the lowest, it shows the biggest upward trend.
The soaring debt-to-GDP ratio is attributable to a more rapid increase in debt than economic growth starting in the 2000s.
Debt held by central and local governments was 135.3 trillion won (US$125.8 billion) in Q2 2003. But it nearly quadrupled in the last ten years to reach 517.9 trillion won (US$481.7 billion) in Q2 2013.
During the same period, corporate debt also rose from 975.3 trillion won (US$907.0 billion) to 2.039 quadrillion won (US$1.896 trillion). Debt owned by households and non-profit organizations more than doubled to reach 1.182 quadrillion won (US$1.099 trillion) from 540.3 trillion won (US$502.5 billion).
However, GDP increased by only 1.74 times, from 742.1 trillion won (US$690 billion) to 1.29 quadrillion won (US$1.20 trillion) over the same period.