Korea vs OECD — Household Debt / GDP

The dispersion that "average" hides

Average household debt across the OECD is 60% of GDP. Korea, at 90%, sits thirty points above it. But that average spans Australia at 110% and Canada at 102% down to Germany at 52%. The distance between top and bottom is comparable to the average itself.

In a distribution this dispersed, the average does not function as a representative value. Saying Korea is "above average" tells you it ranks high; it says nothing about whether that level is dangerous. The more useful question is where Korea sits relative to countries with similar housing and financial structures.

The pace matters more than the level

Australia and Canada have sustained higher readings than Korea for years. Both have expensive housing and mortgage-heavy structures. On level alone, Korea sits below them. But Korea took far less time to get where it is.

Household debt turns dangerous not when the absolute level crosses some threshold, but when debt has outgrown income for long enough. While debt accumulates quickly, capacity to repay does not rise at the same speed. In international comparison, then, "what percentage is it now" is less diagnostic than "how many points did it rise over the past decade" and "how has the debt-service ratio against disposable income moved."

Different accounting definitions, different rankings

The Bank of Korea's household credit series adds merchant credit — credit-card instalments and the like — to household loans. International comparisons, by contrast, typically use BIS or OECD statistics built on national-accounts household debt, and the treatment of sole-proprietor lending varies by country. Even for one "Korean household debt," the number moves by several points depending on which series you cite.

Korea's share of self-employment is above the OECD average, which makes this issue unusually large here. Classify sole-proprietor loans as household debt and the ratio rises; classify them as corporate and it falls. This site states the source series on each indicator card, and on comparison pages groups series computed by the same institution on the same method wherever possible. Even so, read on the premise that full cross-country equivalence is not achieved.

The moment household debt turns into risk

A high household debt ratio is a necessary condition for risk, not a sufficient one. Germany at 52% and Australia at 110% have both been held stably, while other countries hit trouble at lower ratios. What is decisive is not the ratio but the conditions under which the debt is repaid.

The first condition is rate type. A high fixed-rate share means a rate hike does not reach existing borrowers immediately. A high floating-rate share means monetary policy enters household cash flow within months. At the same 90%, one percentage point of rates means different things depending on this mix.

The second is maturity and repayment structure. Where amortising loans are the norm, the outstanding balance naturally falls over time; where bullet repayment at maturity is common, the balance does not fall and the borrower is exposed to changed terms at every refinancing.

The third is distribution. Two countries with the same average absorb shocks very differently depending on whether the debt is concentrated among higher- or lower-income households. Aggregate indicators cannot show this, so debt ratios and delinquency rates by income decile have to be read alongside them.

Compare ratios without checking these three and the discussion stops at "Korea is above average." What policy judgement actually needs is an answer to which rate types, which maturity structures and which income distribution that 90% is sitting on.

The order to read this table in

First, look at the distribution rather than the average. Which band Korea falls into, and what the countries in that band have in common, tells you more than the distance from the mean. Second, read level and pace separately. Third, check the source and definition of the series being quoted.

Fourth, remember that the household debt ratio also depends on its denominator. If a recession shrinks GDP, the ratio rises even when debt is unchanged. When reading a change in the ratio, check which side moved — numerator or denominator — to avoid misreading it.

Fifth, international comparison works better as a mirror on your own structure than as a device for ranking. More useful than knowing who placed where is knowing what problems countries with a similar structure ran into, and which responses actually worked.