The Bank for International Settlement announced on June 8 that South Korea’s household debt-to-GDP ratio increased 2.9 percentage points to 97.7 percent in 2018. In the bank’s recent survey covering 43 countries, the rate of increase is second only to that of China at 3.8 percentage points.
In South Korea, the debt service ratio (DSR) was introduced as a household debt management measure in late October 2018 and the Bank of Korea raised the benchmark rate in November. Still, the measures failed to slow down the pace of increase in household debt. South Korea’s household debt-to-GDP ratio rose from 96.9 percent to 97.7 percent in the fourth quarter of 2018 after reaching 95.2 percent in Q1, 96 percent in Q2 and 96.9 percent in Q3.
In the survey, Switzerland posted a household debt-to-GDP ratio of 128.7 percent, followed by Australia (120.3 percent), Denmark (115.4 percent), the Netherlands (102 percent), Canada (100.7 percent), Norway (99.9 percent), and South Korea.
According to the Bank for International Settlement, the DSR of the household sector of South Korea was 12.7 percent at the end of last year. The country ranked sixth out of 17 countries in this survey category, yet it showed the fastest year-on-year increase with 0.6 percentage points.
The Bank of Korea recently announced that the total household credit of the country increased 4.9 percent to 1,540 trillion won in the first quarter of this year, showing the slowest increase since Q4, 2004. Still, the rate of increase exceeded last year’s nominal GDP growth at 3 percent.