Projected Peak and Decline in Household Debt to GDP Ratio

A recent analysis by the Korea Development Institute (KDI) suggests that Korea's household debt to GDP ratio, currently at 90.3%, will peak within the next five years before entering a decline. This shift is attributed to the aging population and changing demographic structures.

Demographic Changes Driving Debt Trends

The report highlights how increased life expectancy and the housing acquisition demands of the younger generation have significantly influenced the rise in household debt. With aging, the demand for housing is expected to decrease, leading to a natural decline in debt ratios.

Policy Recommendations

KDI research fellow Kim Mi-ru emphasizes the need for household debt management policies to focus on borrowers' repayment abilities and financial institution soundness, rather than arbitrary targets.