Household Debt Soars to 1.7 Times Income, Leaving No Money After Payments

# South Korea's Household Debt-to-Income Ratio Exceeds Global Peers, Hindering Consumption Recovery SEOUL—South Korea faces a significant economic challenge as its household debt-to-income ratio vastly exceeds that of major economies, according to recent data. This alarming debt burden restricts private consumption, creating a persistent cycle of domestic demand stagnation. Bank of Korea data, presented to the National Assembly’s Strategy and Finance Committee by Rep. Cha Gyu-geun of the Cho Kuk Innovation Party, reveals that by the end of 2024, South Korea's financial debt-to-disposable income ratio for households and non-profit institutions was 174.7%. In financial terms, disposable income was KRW 1,356.5 trillion, while financial debt totaled KRW 2,370.1 trillion. Disposable income here pertains to the net income of households and private non-profit organizations after deducting taxes, social insurance contributions, and non-consumption expenditures like loan repayments. Financial debt reflects the market-valued liabilities of households, as calculated on a non-consolidated basis within the Bank of Korea’s flow of funds statistics. # Analyzing Household Debt Trends: Gradual Decline Amid Persistent Issues Examining recent trends, the debt-to-income ratio peaked at 194.4% at the end of 2021, before declining to 191.5% in 2022, 180.2% in 2023, and reaching 174.7% by the end of 2024. Although the ratio is decreasing, it remains notably high compared to other OECD countries. Throughout 2023, household debt rose from KRW 2,316.9 trillion to KRW 2,370.1 trillion, a 2.3% increase. However, disposable income grew quicker, at a rate of 5.5%, increasing from KRW 1,285.8 trillion to KRW 1,356.5 trillion, thus decreasing the ratio. Despite these improvements, South Korea's household debt-to-income ratio surpasses nearly all other developed countries. OECD data indicates that South Korea’s ratio was 186.5% (provisional) at the end of 2023, trailing only Switzerland (224.4%), the Netherlands (220.3%), Australia (216.7%), Denmark (212.5%), and Luxembourg (204.4%). In stark contrast, South Korea's ratio significantly outstrips major economies such as the United States (103.4%), Japan (124.7%), Germany (89.0%), the United Kingdom (137.1%), and France (121.4%). Italy, at 82.0%, remains among the most conservative in household debt levels. # Structural Challenges Stifling Consumption Recovery Economic experts caution that high household debt suppresses consumption, curbs domestic demand, and slows economic growth. Bank of Korea Governor Rhee Chang-yong indicated in a press briefing on September 29 that private consumption growth is predicted to be around 1.1% this year, possibly reaching 1.6%, owing to structural issues like household debt. Stressing the need to curb speculative investments in housing, Governor Rhee reiterated in a November 12 speech for the central bank's founding anniversary that “previous practices of stimulating the economy through excessive real estate investments must be abandoned.” Park Jung-woo, an economist at Nomura Securities, pointed out in a May 2023 report that "the rising costs of debt repayment and interest expenses have structurally diminished household purchasing power, making a consumption recovery unlikely." # Policy Implications and Future Prospects Rep. Cha Gyu-geun noted, “While the ratio has decreased consistently, the actual reduction in debt itself occurred only in 2023.” He emphasized that the government must avoid policies that further expand debt, such as through housing-related stimulus, to ensure sustainable household debt management. He added that active management could stabilize household debt levels, provided the administration avoids heavy reliance on leverage-based economic recovery strategies. Among the OECD's 32-member countries, South Korea remains one of the highest in terms of household financial burdens, raising concerns about the sustainability of consumption-driven growth in one of Asia's largest economies.