The burden of repaying loan principal and interest relative to household income fell for a seventh straight quarter.

According to Bank for International Settlements (BIS) data released on Tuesday, South Korea's total debt service ratio (DSR), which shows the average household sector debt burden relative to income, was 11.4 percent at the end of the second quarter this year.

By the numbers, it was the lowest level in about 5 years since the end of the fourth quarter of 2020 during the COVID-19 pandemic, when it stood at 11.3 percent.

The ratio hit a record high of 12.3 percent at the end of the third quarter of 2023, the highest since the related statistics began in 1999, and has continued to fall for seven quarters through end-June this year.

It fell by 0.2 percentage point each quarter through the end of the first quarter last year, when it was 11.9 percent. After that, it fell by 0.1 percentage point each quarter.

Over the period, household debt kept rising, and the result is interpreted as reflecting the combined impact of income growth, lower lending rates and changes in repayment structures.

Compared with other countries, South Korea's household DSR is higher than the United States at 8.0 percent, the United Kingdom at 8.7 percent and Japan at 7.7 percent, and lower than Norway at 21.1 percent, Australia at 16.3 percent and Canada at 13.9 percent.

It ranked seventh among the 17 countries included in the BIS statistics.

In the third and fourth quarters this year, a slowdown in household debt growth, the Bank of Korea holding its policy rate steady for four straight meetings and rising market rates are expected to affect the DSR.

Meanwhile, South Korea's credit gap, which shows the credit risk of households and companies relative to the size of the economy, was -5.7 percentage points at end-June this year.

The credit gap is a debt risk assessment indicator that shows how far the ratio of private credit (household and corporate debt) to nominal gross domestic product (GDP) deviates from its long-term trend.

A positive credit gap means the ratio of private credit to GDP is above its long-term trend. A negative reading means it is below the trend.

If the negative gap widens, it can be seen as excessive credit normalising, but depending on the case it can also suggest an economic downturn or a credit crunch.

The BIS classifies the figure as an "alarm" if it exceeds 10 percentage points, "warning" if it is 2 to 10 percentage points, and "normal" if it is below 2 percentage points.

South Korea's credit gap hit a record high of 15.6 percentage points at end-March 2021 during the pandemic, the highest since the related statistics began in 1972, and has declined in trend terms since then.

It fell in particular to 0.2 percentage points at end-March 2024 from 3.5 percentage points at end-December 2023, moving into the normal stage, and stayed in negative territory through end-June this year.

The end-June figure was the lowest in about 19 years since the end of the third quarter of 2006, when it was -8.7 percentage points.

Still, the household debt-to-GDP ratio rose slightly to 89.7 percent at end-June from 89.5 percent at end-March. It marked the first uptick in 3 years since the end of the second quarter of 2022, when it was 98.0 percent.

Over the same period, the non-financial corporate debt ratio fell to 110.8 percent from 111.3 percent.

The government debt-to-GDP ratio reached 47.8 percent at end-June, extending record highs for a second straight quarter following 47.2 percent in the first quarter.

[Yonhap News Agency]