South Korea’s National Debt Tops 6,500 Trillion Won... Government Debt Ratio Also at Record High

South Korea’s total debt has exceeded 6,500 trillion won for the first time. As the overall economy continues to rely heavily on borrowing, the increase in government debt in particular stands out.
■ Economy-wide debt reaches 2.5 times GDP
According to data from the Bank for International Settlements (BIS) released on the 23rd, South Korea’s total debt stood at 248.0% of its Gross Domestic Product (GDP) at the end of the third quarter of last year. In other words, total debt was about 2.5 times the size of the country’s GDP. The ratio was 0.3 percentage points lower than in the previous quarter (248.3%), but 1.5 percentage points higher than a year earlier, at the end of the third quarter of 2024 (246.5%).
In won terms, non-financial sector credit came to 6,500.5843 trillion won at the same point in time. This was an increase of about 280 trillion won, or 4.5%, from 6,220.5770 trillion won at the end of the third quarter of 2024, pushing the total above 6,500 trillion won for the first time.
By sector, government debt reached 1,250.7746 trillion won, up 9.8% from 1,139.4017 trillion won a year earlier, marking the fastest growth rate. Household debt rose to 2,342.6728 trillion won and corporate debt to 2,907.1369 trillion won, increases of 3.0% and 3.6%, respectively.
Non-financial sector credit is a concept that aggregates government, household, and corporate debt based on flow-of-funds statistics, and is used for cross-country comparisons. It is commonly referred to as "total national debt" and serves as a key indicator of how much economic growth and asset price gains depend on borrowing. In fact, total debt surpassed 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, continuing its steady rise.
■ Government debt growth at record high
The surge in government debt is particularly striking. The ratio of government debt to GDP jumped from 43.6% to 48.6% in just one year, an increase of 5.0 percentage points and the highest level on record.
The household debt ratio stood at 89.4%, still among the highest in the world. Based on statistics from the Institute of International Finance (IIF) covering 62 countries, South Korea ranks second only to Canada, which has a ratio of 100.4%.
Rising government debt and an expansionary fiscal stance are also cited as sources of inflationary pressure. In its Monetary and Credit Policy Report published on the 12th, the Bank of Korea (BOK) noted, "The expansionary fiscal stance of major countries may support growth, but at the same time it could heighten upward pressure on prices through the expected inflation path." The report went on to warn, "If concerns over fiscal soundness intensify due to additional spending increases, it could further fuel expected inflation."
The corporate debt ratio was 110.8%. This was slightly lower than in the previous quarter (112.6%), but higher than a year earlier (110.6%).
imne@fnnews.com Hong Ye-ji Reporter