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A comparison of the rate of debt increase among countries, with South Korea in 10th place

A sharp surge in debt ratios sparked by Q1 recessions

South Korea ranked 10th out of 39 countries and regions for the rate of increase in debt -- including household, non-financial business, and government liabilities -- as a percentage of GDP for the first quarter of 2020.

South Korea’s household debt levels were found to be the highest among 39 major world economies when total economic scale was taken into account. It also ranked third in the world for the rate of increase in household debt.

A “Global Debt Monitor” report published on July 20 by the Institute of International Finance (IIF) showed South Korea recording a 97.9% ratio of household debt to GDP for the first quarter of 2020, the highest level among 39 countries and regions examined. It was followed by the UK (84.4%), Hong Kong (82.5%), the US (75.6%), Thailand (70.2%), Malaysia (68.3%), China (58.8%), the Eurozone (58.3%), and Japan (57.2%). South Korea’s household debt ratio was up by 5.8 percentage points from 92.1% for the first quarter of 2019 -- the third largest increase after Hong Kong (nine percentage points) and China (6.4).

Household debt was also found to be rising at a steep rate. The first quarter debt ratio for non-financial businesses stood at 104.6%, ranking seventh after Hong Kong (230.7%), China (159.1%), Singapore (125.2%), Chile (110.9%), the Eurozone (109.8%), and Japan (106.4%). The rise from a year before amounted to 7.4 percentage points, the fourth largest increase after Chile (12.5 percentage points), Singapore (11.8 percentage points), and Hong Kong (8.1 percentage points). In its report, IIF noted steep rises in the debt ratio for households and non-financial businesses in China, South Korea, Turkey, and Mexico.

In response, a Bank of Korea (BOK) official said, “The IIF’s latest report was focused chiefly on the situation in emerging economies, as can be seen from the fact that Northern European countries with higher household debt ratios than South Korea were all lumped together into the ‘Eurozone.’”

At 41.4%, South Korea’s government debt ratio ranked at a relatively low 28th out of 39 countries/regions. South Korea also ranked 23rd for the rate of increase in government debt for the first quarter (2 percentage points). Its overall rate of increase in the debt ratio -- including household, non-financial business, and government liabilities -- ranked 10th, with China in first place and the US in sixth. Amid the global recession caused by the COVID-19 pandemic, the worldwide debt ratio reached a historic high of 331%, an 11-percentage point increase from the fourth quarter of 2019.

Total global debt by sector

By Han Gwang-deok, finance correspondent

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