The Korea Institute of Finance announced on February 26 that South Korea’s household debt-to-GDP ratio was 90% at the end of June last year, when the figure was 87.6% for Britain, 78.8% for the United States, 65.9% for Japan, 56.7% for France and 53.4% for Germany.
Between 2013 and the end of June 2016, South Korea’s household debt-to-GDP ratio showed an increase of 7.7 percentage points. During the same period, the ratios decreased from 87.7%, 80.9%, 66% and 55.3% in the respective cases of Britain, the U.S., Japan and Germany while that of France edged up from 55.6%.
Between the end of 2015 and the end of 2016, the household credit balance increased 11.7% and reached 1,344.3 trillion won in South Korea. The annual increment was the biggest ever with the balance breaking the 1,300 trillion won mark for the first time. For reference, South Korea’s annual economic growth rate stood at 2.7% last year.
“Although most of the debts are currently held by high-income households with a sufficient repayment capacity, we need to pay attention to more vulnerable borrowers, that is, low-income and low-credit households, those with multiple loans and so on, with market interest rates facing an upward pressure and financial and economic uncertainties still going on both at home and abroad,” said Bank of Korea Governor Lee Ju-yeol.
According to the central bank, 1.41 million self-employed South Koreans had an outstanding loan balance of 464.5 trillion won at the end of September last year and the amount was approximately 78.6 trillion won, 6.4% of the total household loan balance, on the part of such more vulnerable borrowers.