[알파경제=이준현 기자] It was found that Korea’s household debt is growing at the second fastest rate among developed countries.
According to the Woori Finance Research Institute on the 25th, the average annual household debt growth rate in Korea over the past five years was 1.5%.
This is the second highest level among developed countries, following Hong Kong (5.5%).
According to the Bank for International Settlements (BIS), Korea’s household debt to gross domestic product (GDP) ratio recorded 92% as of the end of the first quarter of this year.
This ranks 5th among major countries, following Switzerland, Australia, Canada, and the Netherlands.
This ratio peaked at 99.2% at the end of the third quarter of 2021 and has been declining due to the increase in nominal GDP.
However, Korea’s average annual household debt growth rate over the past five years is much higher than that of Switzerland (0.5%), Australia (-2.4%), Canada (-0.3%), and the Netherlands (-4.1%), which have higher household debt-to-GDP ratios than Korea. did it
The ranking of household debt to GDP ratio was 15th out of 43 countries in 2012-2013, but steadily rose to 5th place in 2022.
The institute explained, “After the 2008 global financial crisis, household debt ratios in major countries showed a stable trend, while Korea, China, Thailand, and Hong Kong showed a marked upward trend.”
On the other hand, risks related to housing mortgage loans were evaluated as relatively good.
As of last year, the proportion of household loans for home purchase in Korea was 60.2%, lower than the global average (66.8%). Real estate prices relative to income have also fallen for eight consecutive years since 2015, reaching 75.2% of the global average.
Self-employed loans, which account for about 20% of total household debt, were pointed out as a potential risk factor.
The self-employed loan delinquency rate soared from 0.50% at the end of the second quarter of 2022 to 1.56% at the end of the second quarter of this year.
This is in contrast to the slight increase in the general household loan delinquency rate from 0.56% to 0.94% during the same period. In particular, the loan delinquency rate for vulnerable self-employed people soared to 10.2%.
The research institute analyzed that “the proportion of vulnerable borrowers among all household loans is increasing, especially among vulnerable self-employed people,” and that “for a soft landing in Korea’s household debt, it is essential to stabilize the housing market and improve the income and productivity of the self-employed.”
Reporter Lee Jun-hyeon of Alpha Economy (wtcloud83@alphabiz.co.kr)
Here are two PAA (Phrasing Analysis Approach) related to the provided interview transcript:
## World Today News Interview: The Growing Concern of Household Debt in Korea
**Host:** Welcome back to World Today News. Today, we’re tackling a pressing issue impacting Koreans nationwide: the swelling tide of household debt.
Joining us are two esteemed experts to shed light on this complex situation:
* **Professor Kim Ji-Soo,** an economist specializing in financial policy and household debt at Seoul National University.
* **Mr. Park Chan-Yong,** a financial advisor and advocate for responsible borrowing practices.
Welcome to both of you. **Professor Kim,** let’s start with you. The article highlights Korea’s household debt growing at the second-fastest rate among developed countries. What are the primary drivers behind this alarming trend?
**(Professor Kim):** Yes, it’s a concerning phenomenon. Several factors contribute to this rapid growth. Low interest rates in recent years encouraged borrowing, coupled with a cultural emphasis on homeownership and a desire for upward mobility. Additionally, stagnant wages and rising living costs, especially housing, have placed a significant strain on household budgets, forcing individuals to rely more heavily on loans.
**Host:** Thank you, Professor. **Mr. Park,** you work directly with individuals struggling with debt. What are some of the real-life consequences you see stemming from this mounting household debt?
**(Mr. Park):**
The impact is multifaceted and often devastating. I see individuals and families overwhelmed by debt, forced to make difficult choices between basic necessities and debt repayments. This can lead to financial stress, relationship strain, and even mental health issues. The fear of losing their homes and assets weighs heavily on many.
**Host:** It’s a dire situation, indeed. The article mentions that Korea’s household debt-to-GDP ratio, while declining from its peak, remains high. **Professor Kim,** how concerning is this ratio, and what does it tell us about the long-term economic health of Korea?
**(Professor Kim):** The high ratio indicates a significant portion of Korea’s economic output is directed towards servicing debt instead of investment and consumption, which are vital for sustainable growth. Prolonged high debt levels can create a vulnerability to economic shocks and hinder future growth potential.
**Host:** Now, the article does highlight a positive aspect – Korea’s relatively low proportion of housing mortgage loans in total household debt compared to other developed countries.
**Mr. Park**, does this offer any hope or mitigate the concerning debt situation?
**(Mr. Park):** While it’s encouraging that a large portion of debt isn’t tied to housing, which can be a more volatile asset class, the trend of increasing debt among the self-employed is worrisome.
These individuals often rely on unsecured loans with higher interest rates, making them particularly vulnerable to economic downturns. Their financial struggles have wider implications for the economy.
**Host:** That’s a crucial point. **Professor Kim,** the research institute suggests stabilizing the housing market and improving the income and productivity of the self-employed as key steps towards mitigating this household debt crisis. Can you elaborate on these solutions and their potential impact?
**(Professor Kim):**
Targeted policies are crucial. Stabilizing the housing market can involve measures to curb speculative activity and promote affordable housing options. Addressing the challenges faced by self-employed individuals requires focusing on policies that foster business growth, provide access to affordable financing, and enhance their skills and productivity.
**Host:** This has been a truly insightful discussion. Thank you, **Professor Kim** and **Mr. Park,** for shedding light on this critical issue.
**Concluding Remarks:**
The growing household debt in Korea paints a picture of a complex economic landscape. While it presents significant challenges, we’ve discussed potential solutions that could pave the way towards a more sustainable and prosperous future for Korean households and the nation as a whole.
We encourage our viewers to stay informed, engage in responsible financial practices, and support policies that promote economic stability and well-being for all.
