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Korea's household debt-to-GDP ratio still among world's highest

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By Lee Kyung-min

Korea's ratio of household debt to GDP is among the highest of major economies, despite the revision of the base year to 2020 from 2015, data showed Sunday. The figure for corporate debt to GDP came to the fifth-highest, down from the previous fourth-highest.

According to the Bank of Korea and the Ministry of Economy and Finance, Korea's household debt-to-GDP ratio came to 93.5 percent, down 6.9 percentage points from 100.4 percent, as a result of the base year change.

The corporate debt-to-GDP ratio dropped to 113.9 percent, down 8.4 percentage points from 122.3 percent.

The downtick is attributed to the increase in GDP to 2,401 trillion ($1.7 trillion) won last year, up from 2,236 trillion won.

However, despite the revision, Korea's household debt-to-GDP ratio came to 100.5 percent, still among the highest of the countries surveyed as of the fourth quarter last year, as measured by the International Institute of Finance.

The figure for Switzerland was 126.3 percent, followed by Australia with 109.6 percent and Canada's 102.3 percent.

The Bank for International Settlements will announce last year's debt ratio of each country.

The monetary authorities will continue to curb the snowballing household debt, as regulated by macroprudential measures.

"Korea's household debt levels are still elevated compared to its advanced peers," an observer said. "The financial stability authorities will push ahead with measures that bolster fiscal consolidation irrespective of the base year change."

The measures are likely to maximize the use of policy tools to have corporate debt under control, mindful of potential ramifications in the debt-ridden project financing markets.

"A significant portion of liquidity available was mobilized to meet the need of project financing businesses. It will be the job of the financial authorities to tighten lending rules and fortify the financial soundness of at-risk market players."

Lee Kyung-min


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