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The word “loan” is displayed on a window at a commercial bank in Korea. (Yonhap News)

South Korea remains the highest-ranked of the world’s 36 major economies (with the Eurozone counted as one entity) for household debt relative to national economic scale, a report shows.

During the first quarter of 2022, the ratio of household debt to gross domestic product (GDP) for Japan, the US, and other major economies fell by over four percentage points from one year earlier as the COVID-19 pandemic drove a decline in consumption. But in South Korea’s case, the drop was just 0.7 percentage points.

South Korea also ranked second in the world for the rate of increase in corporate debt.

An examination Monday of a “Global Debt Monitor” report published in May by the Institute of International Finance (IIF) showed South Korea’s ratio of household debt to GDP at 104.3% for the first quarter of 2022 — the highest rate among the 36 countries examined. The performance means it has yet to shed its standing as having the world’s highest level of household debt.

Also ranked in the top 10 were Hong Kong (95.3%), Thailand (89.7%), the UK (83.9%), the US (76.1%), China (62.1%), Japan (59.7%) and the Eurozone (59.6%). South Korea was the only country examined where total household debt exceeded GDP.

In comparison with the first quarter of 2021, South Korea’s ratio of household debt to GDP fell by 0.7 percentage points from 105.0% to 104.3%. This was a much smaller decline than those observed over the same period in the UK (7.2 percentage points), the US (4.7), Japan (4.6), and the Eurozone (2.9).

South Korea also placed near the top when it came to the rate of increase in corporate debt as a percentage of economic scale.

The ratio of debt to GDP for South Korea’s non-financial companies stood at 116.8% for the first quarter of 2022, ranking seventh behind Hong Kong (281.6%), Singapore (163.7%), China (156.6%), Vietnam (140.2%), and Japan (118.7%).

The debt ratio for South Korean companies was up by a full 5.5 percentage points from 111.3% in the same period in 2021. That was the second-largest increase observed among the 36 countries, after the 10.9-percentage point jump recorded by Vietnam.

In contrast, South Korea ranked 25th for the ratio of government sector debt to GDP (44.6%). The rate of increase in the government debt ratio was -1.2 percentage points over the past year, placing South Korea in the middle tier in 15th place. Japan had the highest ratio of government debt to economic scale at 248.7%.

According to the IIF report, the global ratio of debt (household, corporate, government, and financial sectors) to GDP was around 348%, or roughly 15 percentage points lower than its peak in the first quarter of 2021.

But the report also noted that some countries, including South Korea, Vietnam, and Thailand, had set new records of increase individually. Total global debt was calculated at US$305 trillion at the end of March 2022, an increase of US$3.3 trillion from late 2021.

Amid rising interest rates and slumping real estate transactions, household loans by South Korean banks of deposit declined for four straight months, with drops of 200 billion won in December 2021, 500 billion won in January 2022, 200 billion won in February, and 1 trillion won in March. But as of April, they showed their first increase in five months at 1.2 trillion won.

By Cho Kye-wan, senior staff writer

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