South Korea's Debt Reaches Historic High of Over $4.27 Trillion
Click to start listening
Synopsis
As of March 20, South Korea's total debt, which includes government, corporate, and household liabilities, has hit a record high of 6,222 trillion won (US$4.27 trillion) amid weak domestic demand. This marks a significant increase in the nation's economic vulnerability.
Key Takeaways
- Total debt in South Korea has reached 6,222 trillion won.
- Government debt surged by 11.8% year-on-year.
- Corporate debt reached 2,798 trillion won.
- Household borrowing increased by 2.1% to 2,283 trillion won.
- Financial regulators are implementing measures to enhance savings banks.
Seoul, March 20 (NationPress) The total debt encompassing the government, corporations, and households in South Korea has soared to an unprecedented level as a result of sluggish domestic demand and declining revenue, as indicated by data released on Thursday.
As of the conclusion of the third quarter, the nation's overall government debt alongside corporate and household borrowing has reached a staggering 6,222 trillion won (approximately US$4.27 trillion), according to the Bank for International Settlements (BIS).
This figure signifies a 4.1 percent increase compared to the previous year and a 0.9 percent rise from the preceding quarter, as reported by Yonhap news agency.
This debt level equates to 247.2 percent of the nominal gross domestic product (GDP), marking its lowest point since the second quarter of 2021.
Out of the total debt, corporate liabilities reached 2,798 trillion won by the end of September, reflecting a 2.9 percent rise year-on-year. Household debt increased by 2.1 percent to hit 2,283 trillion won.
Government debt surged by 11.8 percent from a year prior, amounting to 1,141 trillion won, as per the data.
In response, the financial regulator announced a package of measures aimed at boosting the competitiveness of savings banks, which include relaxing regulations on mergers and acquisitions (M&As) and implementing more lenient loan classification standards.
The Financial Services Commission (FSC) declared it will establish a fund exceeding 1 trillion won (around US$689 million) to assist savings banks in removing non-performing loans from their balance sheets and initiate a special mechanism to manage bad loans provided by savings banks.
The regulator also indicated plans to simplify M&A regulations within the sector and reassess the current loan classification rules, which they argue are overly stringent given the existing business landscape.
Recent data revealed that assets of savings banks have consistently increased, reaching 120.9 trillion won at the end of last year, up from 92 trillion won in 2020 and 86.9 trillion won in 2010.
However, their lending practices predominantly focus on real estate development projects and financially unstable clients, rendering them susceptible to economic fluctuations, which has led to reduced profitability and deteriorating financial conditions.
