This week, we have news reports revealing two significant statistics. One has it that Korea is to achieve $1 trillion in annual two-way trade volume this week. The other is not so encouraging: the nation’s total household debt is expected to hit 1,000 trillion won by 2013 ― roughly equivalent to $1 trillion.
These two figures are of course not directly related to each other in economics. Yet, they are related to the general perception among Koreans regarding how far they have come through the past decades in a dash from poverty to affluence both on the individual and national levels.
As of the end of last month, the Republic of Korea recorded $500 billion in exports this year. Because the total import volume comes a little below total exports, the combination of the two will reach $1 trillion probably in the middle of this week. It certainly is great progress for a nation which celebrated reaching the $100 million mark in exports in 1964.
“Building the Nation with Exports” has been the national catch phrase. The growth of the national economy was illustrated by the rise of the annual export volume to $1 billion, $10 billion and to $100 billion, and people felt richer accordingly. Other numbers also grew, but negative figures such as government debts and total external liabilities did not have much direct impact on individuals until the IMF bailout of 1997. The crisis passed and the export-dominated public psyche continued into the 21st century. Then, the surging household debt is awakening Koreans.
Total household debt is expected to grow by 60 trillion won this year to over 900 trillion won with steep price rises and reduced real income. People are cancelling installment deposits and insurance policies to pay interest on their debts, which averaged 50 million won per household. They are paying more than 50 trillion won out of their hard-earned income to their lenders each year.
Predictions that household debts will hit 1,000 trillion won in 2013 should alert Koreans to the ticking time bomb. The figure with 15 zeros should drive home a sense of urgency among people so that they try to reduce their debts by just 1 million won through thrift and savings. And we should first shed the false sense of affluence that makes people less afraid of incurring debts. Korea’s export volume, ranked 8th in the world, is largely sustained by enormous overseas sales by conglomerates. The impressive annual export figures do not necessarily mean you can borrow and spend so liberally.
