(Bloomberg) -- South Korea’s leading opposition candidate warned of a potential collapse in the housing market and a spike in bankruptcies as interest rates rise, blaming President Moon Jae-in for letting debt levels hit a record through expansionary spending.

Hong Joon-pyo, one of the top-ranked conservatives seeking to be the next president, said the current level of fiscal spending is unsustainable with government debt expected at over 1,000 trillion ($855 billion) next year.   

“Moon generously spends people’s money as if it were his and will then leave office with the coffers empty. Whoever takes over from Moon will certainly be frustrated,” Hong said. “You can’t just keep using expansionary fiscal policy.”

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Korea’s monetary and fiscal stimulus have helped the economy hold up through the pandemic, while leaving financial markets awash with cheap money that created a debt-driven bubble in the property market. The BOK has started to raise rates in a bid to normalize policy, while Moon has proposed another 8.3% increase in spending for next year. 

“With most people relying on bank loans to buy homes, how will they cope as borrowing costs start to rise?” Hong said, warning of defaults on loans and a property-market correction.

With a total of six extra budgets since the pandemic struck early 2020, Korea’s debt load is expected to reach more than half the size of the economy next year -- Moon’s final year in presidency -- as opposed to just 36% in 2017 when he took office. 

After its rate hike in August, the BOK made clear more raises will come. Economists see November as the most likely month for the next move.  

Korea’s household debt jumped 10.3% from a year earlier during April-June, the fastest pace since 2017. The record-high indebtedness, combined with rising rates, are raising concerns over people’s debt-repayment burden as more than 80% of new loans to households have floating rates. 

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