The combined debt of the South Korean government and households has surged past 3 quadrillion won for the first time. (Image courtesy of Yonhap)
SEOUL, Aug. 26 (Korea Bizwire) – The combined debt of the South Korean government and households has surged past 3 quadrillion won for the first time, according to recent data from the Ministry of Economy and Finance and the Bank of Korea.
This milestone, reached at the end of the second quarter, equates to 127% of last year’s nominal GDP, signaling potential economic challenges ahead.
The total debt, which includes both national debt (excluding local government debt) and household credit, stood at 3.04 quadrillion won at the end of June. This marks a significant increase of 44 trillion won from the first quarter alone, more than double the growth seen in the previous quarter.
Government debt rose by 30.4 trillion won to 1.15 quadrillion won. Analysts attribute this increase to a combination of factors: ongoing tax revenue shortfalls for the second consecutive year, a policy of concentrated fiscal spending in the first half of the year, and increased issuance of treasury bonds.
The government’s tax reduction policies, implemented without a clear strategy to broaden the tax base, are also cited as contributing to the weakening fiscal foundation.
Household credit, which encompasses loans from banks, insurance companies, private lenders, and public financial institutions, as well as credit card balances, reached a record high of 1.9 trillion won.
This represents a substantial increase of 13.8 trillion won in the second quarter alone. The surge is primarily attributed to the recent recovery in housing transactions, with mortgage loans increasing by 16 trillion won.
The rapid growth in both government and household debt, coupled with a prolonged high-interest rate environment, is beginning to constrain both public and private consumption.
Kim Kwang-seok, head of economic research at the Korea Economic and Industrial Research Institute, warns that this trend could further limit domestic economic recovery in the future.
M. H. Lee (mhlee@koreabizwire.com)
