S. Korea's debt-to-GDP ratio hits record high in Q2

SEOUL, Sept. 26 (Xinhua) -- South Korea's debt-to-gross domestic product (GDP) ratio hit a new record high in the second quarter, boosting worry about financial instability and economic slump, the central bank said Tuesday.

The estimated ratio of the combined private-sector credit, including household and corporate debts, to the nominal GDP, reached a fresh quarterly high of 225.7 percent at the end of June, up 1.2 percentage points from three months earlier, the Bank of Korea (BOK) said in its financial stability report.

The ratio of household credit to nominal GDP added 0.2 percentage points to 101.7 percent during the April-June quarter, while the ratio of corporate credit to nominal GDP gained 1.1 percentage points to 124.1 percent.

The BOK said risk factors in the local financial system involved the increased household debt, the higher insolvency risk of the real estate market exposure in non-bank financial institutions, and the expanded debt repayment burdens for both companies and households.

The central bank had left its benchmark interest rate unchanged at 3.50 percent since January after hiking it by 3.0 percentage points for the past one and a half years.

The BOK noted that it would be difficult to rule out a possibility for a sharp fall in asset prices to cause downturns both in the financial system and the real economy, stressing that the higher debt repayment burden on households and companies could lead to sluggish consumption and investment.