This Mar. 9 file photo shows a sign about loan programs in front of a bank in Seoul. -Yonhap via The Korea Herald/ANN
SEOUL: South Korea's household debt-to-gross domestic product ratio was the second highest among major nations, following Canada, amid growing concerns about rising household borrowing amid weak growth and domestic demand, data showed Sunday (March 16).
The debt-to-GDP ratio for South Korea came to 91.7 per cent in the fourth quarter of 2024, which marked the second highest among 38 major nations, according to the data from the Institute of International Finance.
Canada topped the list with 100.6 per cent, and Thailand came in third with 92.4 per cent, followed by Hong Kong with 93.2 per cent, Britain with 78.1 per cent and the United States with 71.9 per cent, the report showed.
The average global ratio came to 60.3 per cent.
In February, household loans extended by South Korean banks rose for the first time in three months to come to 1,143.7 trillion won (US$787.34 billion) amid rising housing prices in the affluent districts of southern Seoul following state deregulatory moves.
Last year, financial authorities pressed major lenders to implement tight lending rules to rein in surging household debts and rising home prices.
But banks eased some of the regulations at the beginning of the year, while demand for loans went up during the season for moving.
Also attributing to the surge in household debt was the Seoul municipal government's easing of the so-called land transaction permission zone scheme imposed in some areas of Seoul's Gangnam, Seocho and Songpa districts last month, which caused a marked increase in real estate prices there and in adjacent regions.
The scheme requires state permission to buy or sell homes in the designated areas. It came into force in 2020 in an effort to curb property speculation and soaring home prices.
Bank of Korea (BOK) Governor Rhee Chang-yong has stressed that the government aims to lower the ratio gradually to the 80 pervcent level, as excessive household borrowing could affect financial stability and economic growth.
Presenting a gloomier outlook for economic growth for 2025, the BOK last week slashed the benchmark interest rate by a quarter percentage point. It has hinted at up to two additional cuts this year to shore up growth.
"We've seen an increase in home transactions in Seoul and the surrounding Gyeonggi regions recently," a BOK official said. "Given the situation, household debt is feared to grow further in the coming months." - Yonhap via The Korea Herald/ANN
