South Korea’s household debt has been rising at a faster rate than its economic growth, data showed Sunday, raising concern it could put the economy in jeopardy unless proper measures are taken.
According to the data by the Bank of Korea, South Korea’s household credit totaled 937.5 trillion won ($873 billion) as of the end of September, up 5.6 percent from a year earlier.
Household credit refers to credit purchases and loans for households extended by financial institutions, including commercial lenders and mutual savings banks.
The figure marked the lowest increase rate for a third quarter in four years and slowed from a 5.8 percent on-year gain in the second quarter.
But the third-quarter growth rate was much higher than the country’s nominal economic growth rate of 2.4 percent for the period, sparking worries over the sustainability of household debt.
“Household debt growth exceeding that of gross domestic product can emerge as a problem at a time of a protracted economic slump,” said Shin Min-young, an economist at LG Economic Research Institute. “Urgent measures are needed to boost the country’s nominal economic growth rate and give consumers more room to spend.”
Household debt has been a headache for South Korean policymakers, who fear that it could crimp private consumption, posing a severe blow to the already slowing economy. The local financial regulator has taken a series of measures to engineer a soft landing for household debt. (Yonhap News)
