South Korea’s Total Debt Tops 6,500 Trillion Won... 2.5 Times GDP, Government Debt at Record High

[The Financial News] South Korea’s total debt has surpassed 6,500 trillion won for the first time on record. As the economy continues to rely heavily on borrowing, the increase in government debt, in particular, has been striking.
According to data released on the 23rd by the Bank for International Settlements (BIS), South Korea’s total debt stood at 248.0% of gross domestic product (GDP) as of the end of the third quarter of last year. In other words, the country’s overall debt was about 2.5 times the size of its economy. The ratio was down 0.3 percentage points from 248.3% at the end of the previous quarter, but up 1.5 percentage points from a year earlier, when it was 246.5%.
Over the same period, non-financial sector credit, measured in won, came to 6,500.5843 trillion won. That was an increase of about 280 trillion won, or 4.5%, from roughly 6,220.5770 trillion won a year earlier, marking the first time it has exceeded 6,500 trillion won.
By sector, government debt reached about 1,250.7746 trillion won, up 9.8% from 1,139.4017 trillion won a year earlier, the fastest growth among the major sectors.
Household debt stood at about 2,342.6728 trillion won, while corporate debt came to 2,907.1369 trillion won, rising 3.0% and 3.6%, respectively, from a year earlier.
Non-financial sector credit is a measure based on flow-of-funds statistics that aggregates the debts of the government, households and corporations, and is used for cross-country comparisons. Commonly referred to as “national total debt,” it is a key indicator of how much economic growth and asset price increases depend on borrowing. In fact, total debt has continued to climb, surpassing 5,000 trillion won in the first quarter of 2021, 5,500 trillion won in the fourth quarter of the same year, and 6,000 trillion won in the fourth quarter of 2023.
The surge in government debt is particularly notable. The ratio of government debt to GDP jumped from 43.6% to 48.6% over the span of a year, a rise of 5.0 percentage points and the highest level on record.
The household debt ratio, at 89.4%, remains among the highest in the world. According to statistics from the Institute of International Finance (IIF), it is the second highest among 62 countries, after Canada at 100.4%.
Rising government debt and an expansionary fiscal stance are also being cited as sources of inflationary pressure. In its Monetary and Credit Policy Report released on the 12th, the Bank of Korea (BOK) stated that “the expansionary fiscal stance in major economies, while supporting growth, could heighten inflationary pressures through the expected inflation channel.” It went on to warn, “If concerns over fiscal soundness intensify due to additional spending, this could further fuel inflation expectations.”
The corporate debt-to-GDP ratio stood at 110.8%. This was slightly lower than the 112.6% recorded in the previous quarter, but higher than 110.6% a year earlier.
imne@fnnews.com Hong Ye-ji Reporter