South Korea's household debt as a share of nominal gross domestic product (GDP) fell to its lowest level in over six years as of the end of last year. With strong growth continuing—nominal GDP rose 17.1% year-on-year in the first quarter of this year—the household debt-to-GDP ratio is expected to decline further.
According to the Bank for International Settlements (BIS), Korea's household debt-to-GDP ratio stood at 88.6% as of the end of last year, down 0.8 percentage point from the end of the previous quarter. This marks the lowest level in six years and three months, since the end of the third quarter of 2019 (88.3%).
The household debt-to-GDP ratio peaked at 99.1% at the end of the third quarter of 2021 before gradually declining, falling below 90% to 89.6% at the end of 2024. It then moved relatively sideways at 89.5% at the end of the first quarter last year, 89.7% at the end of the second quarter, and 89.4% at the end of the third quarter, before dropping sharply to 88.6% at the end of the fourth quarter.
Analysts attribute this change to a combination of factors, including the steep rise in nominal GDP, stronger household debt management by financial authorities, and lending restrictions across the financial sector. Moreover, nominal GDP growth in the first quarter of this year reached 17.1% from a year earlier, the highest since the third quarter of 1995 (19.2%).
The Bank of Korea and financial authorities have set a goal of lowering this ratio below 80% over the medium to long term. Forecasts suggest that if nominal GDP growth continues, the household debt-to-GDP ratio will converge toward the target.
Driven by the effect of rising nominal GDP, government debt also fell by a margin rarely seen since the statistics began.
Korea's government debt-to-GDP ratio fell 2.0 percentage points to 45.7% from 47.7% at the end of the third quarter last year—in just three months. This is the first time the ratio has fallen by 2.0 percentage points at once since the BIS began compiling the statistics.
The government debt ratio reached a record high at the end of the second quarter last year (47.8%) amid the government's expansionary fiscal stance, then eased to 47.7% at the end of the third quarter before falling sharply at the end of the fourth quarter.
However, compared with the end of 2024 (43.6%), it remains more than 2.0 percentage points higher.
The prevailing forecast is that the ratio will decline further as nominal GDP surges.
