Korean corporate and household debt is getting riskier

The Bank of Korea announced on September 22 that the ratio of corporate and household liabilities to nominal GDP was 221.2% in the second quarter of this year. The ratio increased by 0.3 percentage points in three months to once again reach the highest level. Household and corporate liabilities stood at 1,869.4 trillion won and 2,476.3 trillion won, respectively.

The central bank pointed out that the current inflationary pressure and trend in interest rates are likely to increase borrower burden and financial market volatility, as these private sector debts are already large.

According to the bank, the number of fringe companies is likely to rise again as interest rates rise. In 2021, fringe business and borrowing ratios fell to 14.9% and 14.8%, pre-COVID-19 levels, with business sales and profitability showing some recovery.

The bank said the ratios could reach 18.6% and 19.5% in its worst-case scenario of a higher lending rate and higher operating costs attributable to the lending rate. foreign exchange and raw material cost factors.