National and Household Debt Surpasses 3000 Trillion Won... Impact of Economic Slowdown and Housing Prices

Constraints on Fiscal and Monetary Policies Due to Rising 'Debt'
Q2 Sees Double the Increase Compared to Q1

National and household debt has surpassed 3,000 trillion won for the first time in history.

According to the Ministry of Economy and Finance and the Bank of Korea on the 25th, as of the end of the second quarter of this year, national debt (excluding local government debt) and household debt (household credit) recorded a total of 3,042 trillion won, an increase of 44 trillion won compared to the previous quarter (2,998 trillion won). This is about 127% of nominal Gross Domestic Product (GDP), marking the first time it has exceeded 3,000 trillion won.

National debt consists of government bonds (Treasury bonds, National Housing bonds, Foreign exchange stabilization bonds), borrowings, and government debt guarantee obligations. Among these, Treasury bonds account for the majority. Household credit refers to comprehensive household debt, including loans received by households from banks, insurance companies, loan companies, and public financial institutions, plus prepayment card usage amounts (sales credit).

The 44 trillion won increase in the second quarter is more than double the increase of 20 trillion won in the first quarter of this year. It is the largest increase since the third quarter of 2021 (63 trillion won), when the COVID-19 pandemic was at its peak.

In the case of national debt, it increased by 30.4 trillion won compared to the previous quarter. The increase in national debt is interpreted as being influenced by economic downturn and tax reduction policies.

Household credit surged by 13.8 trillion won, setting a new record high. This is believed to be due to the clear recovery trend in the real estate market centered around Seoul and other areas, which led to an increase in related loans. In fact, mortgage loans among household loans increased by as much as 16 trillion won.

Meanwhile, the increase in national and household debt, combined with the high interest rate trend, is evaluated to be leading to an overall contraction in consumption. In particular, it is also assessed that this is restricting the government's fiscal policy tools such as total expenditure and interest rate cuts, as well as monetary policy measures.