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The impact of demographic change on household debt

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  • Kim, Meeroo

Abstract

Over the past two decades, Korea's household debt- to-GDP ratio has trended upward, reflecting greater incentives for asset accumulation amid rising life expectancy. Household debt has increased through different asset accumulation patterns across generations: older cohorts prepare for longer post- retirement years by building financial assets that supply funds, whereas younger cohorts borrow them mainly to acquire housing. However, this trajectory is forecast to reverse in the coming years as longevity gains slow and accelerating population aging reshape intergenerational financial flows. Maintaining stability in the short to medium term will require close coordination between prudent financial policies and non-financial reforms, such as improving labor market flexibility.

Suggested Citation

  • Kim, Meeroo, 2025. "The impact of demographic change on household debt," KDI Focus 143, Korea Development Institute (KDI).
    • Handle: RePEc:zbw:kdifoc:343513
    DOI: 10.22740/kdi.focus.e.2025.143
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