Household debt ratio much higher than OECD average

South Korea's household debt compared to its gross domestic product (GDP) stood much higher than the average for other developed market economies with high income, a local report showed Thursday.

The report by the Korea Chamber of Commerce and Industry (KCCI) showed the household debt-to-GDP ratio for the country hitting 81 percent in 2010, which is higher than 73 percent for the whole of the Organization for Economic Cooperation and Development (OECD).

In that year, debt incurred by households as measured by the Paris-based organization, reached 952 trillion won (US$816.4 billion).

The ratio placed 14th among the 30 countries checked. It was lower than countries such as Britain, the United States and Spain, but 20 percentage points higher than Greece, which is struggling to cope with serious fiscal problems.

The KCCI, which is the largest private economic organization in the country, added South Korea's household debt number is alarming due to the rapid pace of growth.

Debt growth rose 2.4 percentage points on-year to 9.8 percent in 2010, which is again much higher than the OECD average of 6.3 percent, and third highest after 12.1 percent reached by Greece and 10.8 percent tallied for Turkey.

"One reason why the International Monetary Fund cut South Korea's growth to 3.25 percent this year has to do with the high household debt problem facing the country that could drag down economy," a chamber official said.

He said that because 43 percent of all household debt is linked to money borrowed to buy homes, Seoul needs to resolve the long drawn depression in the property market.

The KCCI, meanwhile, called on the government to take action to help create more jobs that could raise income necessary for paying back outstanding debts.

It stressed that excessive restrictions on fresh loans could pose more problems and called for various tax cuts that can fuel transactions in the real estate market. (Yonhap)