Debt-to-GDP ratio for private sector reaches all-time high in 2021

All News 14:35 March 24, 2022

SEOUL, March 24 (Yonhap) -- The debt-to-gross domestic product ratio for the private sector reached an all-time high in 2021, raising worries over the increasing financial burden on households and businesses amid fast-rising interest rates, central bank data showed Thursday.

According to the report by the Bank of Korea (BOK), outstanding debt extended to households, nonprofit organizations and businesses came to 4,530 trillion won (US$3.72 trillion) as of end-2021, according to the preliminary data.

The ratio of the debt to the nominal GDP rose to 220.8 percent, the highest since relevant data began to be compiled in 1975. It was also up 7.1 percentage points from a year earlier.

Of them, outstanding household and corporate debt amounted to 1,862.1 trillion won and 2,361.1 trillion won, respectively, up 7.8 percent and 10.7 percent from a year earlier, the data showed.

The rising debt has been cited as a potential risk factor that could weigh on Asia's fourth-largest economy. Recent rate hikes have also spawned concerns over deepening the financial burden on households and businesses still reeling from the fallout from the pandemic.

The BOK has raised its key policy rate three times since August, including the latest quarter percentage-point increase in January, to tamp down inflation and discourage people from taking out loans.

Those rate hikes have been in tandem with financial regulators' moves to toughen lending rules amid worries that household debt is growing out of control.

In particular, the ratio of household debt to disposable income grew 4.3 percentage points on-year to 173.4 percent as of end-2021, indicating that households are having a hard time in making interest and principal payments, the report showed.