Experts have been churning out a flurry of warnings about South Korea’s snowballing household debt. In recent days, two notable warnings have been issued: one from a top-ranked official of the presidential office and the other from the International Monetary Fund.

Both warnings share the view that household debt is now at a serious level and the related risks should be kept manageable. The question is whether the government, lenders and households are willing to take the advice seriously and act accordingly.

On Sunday, Kim Dae-ki, chief of staff to President Yoon Suk Yeol, abruptly raised the issue of the country’s growing household debt in a coordination meeting with government and the ruling party officials.

“If a crisis breaks out from the meltdown of household debt, the impact could be many times more destructive than the Asian financial crisis that hit the nation in 1997,” Kim said.

Kim’s comparison with the 1997-98 crisis that forced the country to seek an international bailout sheds light on the ominous potential of the festering household debt problem.

Kim said that leveraged home purchases and investments were particularly dangerous, claiming that these risky borrowing practices gained popularity in the previous Moon Jae-in administration.

Coincidentally, the International Monetary Fund on Sunday made public the transcript of a briefing on regional economic outlook for Asia and Pacific, which was held in Singapore Oct. 18 -- an event in which an IMF official issued a warning about Korea’s household debt.

“(South Korea’s) household debt in total is about on average 160 percent of disposable income, which is quite high in the high range among the OECD economies,” said Thomas Helbling, deputy director of the Asia and Pacific Department at the IMF. “I think our key point is that macro prudential policies should be set so that the risks from higher household debts can be managed.”

Helbling said one aspect of the issue is to keep the risk management for households and ensure that asset quality, particularly mortgage loans, remains serviceable. The Korean financial authorities should make sure that debt servicing is guaranteed under reasonable circumstances through stress testing involving adverse scenarios.

Another aspect to consider, Helbling said, involves risks related to lenders. To contain risks, lenders should ensure proper lending standards when extending debt or borrow loans to households, while authorities must regulate new financial products and intermediaries properly.

Statistics show the risks are growing at a precipitous pace in connection with household debt and related factors such as high interest rates, investment in the property market and government policies.

According to the Bank of Korea, the country’s household borrowing from banks expanded for a sixth straight month to stand at 1,079.8 trillion won ($806 billion) at the end of September, up 4.9 trillion won from the end of August.

One estimate from the IMF showed that Korea’s household debt was 108.1 percent of gross domestic product at the end of 2022, making it the second largest in the world. Yet more troubling is the rapid pace of the loan growth that was the fastest among the 26 countries covered by the IMF report.

In the Moon administration, those in their 20s and 30s rushed to ride the property boom through household loan-backed home purchases. Unfortunately, the young generation’s appetite for debt-financed investment remains strong under the Yoon Suk Yeol administration. One factor is that the Yoon administration has loosened property market regulations, a policy criticized by some as populist. This policy clashes with that of the BOK, which kept the benchmark rate unchanged at 3.5 percent for the sixth straight time on Oct. 19.

Given that the high interest rate trend led by the US is expected to continue, the government is urged to implement policies aimed at preventing overheating in the property market, a top priority to tackle the explosive household debt problem.