Household debt in South Korea reaches record high.

VTV.vn - Rising global bond yields are creating double pressure on the South Korean economy, as borrowing costs escalate while household debt continues to hit new record highs.

South Korea faces double pressure from record-high household debt.

The yield on 30-year US Treasury bonds has exceeded 5%, pulling yields up in Japan, the UK, Germany, and South Korea. During the May 20th trading session, the KOSPI index briefly fell by more than 3% due to concerns about rising financing costs. Notably, South Korean household debt reached nearly 1.99 trillion won at the end of March, equivalent to approximately $1.32 trillion.

Experts believe this trend reflects excessive borrowing for home purchases, commonly known in South Korea as "yeongkkeul," along with leveraged stock market investments. Margin loans for stock trading—a key indicator of market speculation—have now exceeded 36 trillion won, the highest level ever.

Against this backdrop, the Bank of Korea (BoK) has signaled a possible adjustment to its monetary policy direction. BoK Vice Governor Yoo Sang Dai suggested that the end of the interest rate cut cycle may be approaching, and the central bank needs to consider the possibility of raising interest rates again. According to BoK calculations, a 0.25 percentage point increase in lending rates could lead to an additional 3.2 trillion won in interest payments for South Korean households annually.

Experts believe that, given the likelihood of global interest rates remaining high for an extended period, both South Korean households and businesses need to exercise greater caution in managing their finances. Rising interest rates not only increase the debt burden on individuals but also raise the cost of capital for businesses, thereby impacting investment and production expansion.

Furthermore, many opinions suggest that the South Korean government needs to be cautious with its fiscal expansion plans given the market's sensitivity to public debt and interest rate pressures. According to the plan, South Korea will issue approximately 110 trillion won in government bonds this year to cover the budget deficit. Analysts believe that if the government signals that it will use additional tax revenue to reduce the scale of bond issuance, this could help alleviate market concerns about long-term fiscal sustainability.

Source: https://vtv.vn/no-ho-gia-dinh-tai-han-quoc-cao-ky-luc-100260520215534604.htm