BUSINESS S.Korea's household, corporate debts in private sector double nominal GDP in Q3

BUSINESS

S.Korea's household, corporate debts in private sector double nominal GDP in Q3

Xinhua

19:16, December 20, 2018

SEOUL, Dec. 20 (Xinhua) - South Korea's corporate and household debts in the private sector almost doubled the nominal gross domestic product (GDP) in the third quarter amid rising worry about a heavier debt-servicing burden on expected interest rate hike, a central bank report said on Thursday.

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Employees work at the Kookmin Bank headquarters, a unit of KB Financial Group Inc., in Seoul, South Korea. (File Photo: VCG)

According to the Bank of Korea (BOK)'s financial stability report to the National Assembly, the ratio of credit in the private sector to the nominal GDP stood at 197.2 percent as of end-September, up 4.1 percentage points from the end of last year.

The ratio of household debts to disposable income gained 4.1 percentage points over the year to 162.1 percent in the third quarter.

Corporate debts extended by deposit-taking banks grew 5.1 percent in the September quarter from a year earlier, but the corporate debt ratio kept falling to 75.6 percent as of end-June.

The massive private-sector debts boosted concerns about the heavier debt-servicing burden amid the expectations for policy rate hikes next year.

The BOK raised its benchmark interest rate in late November to 1.75 percent, the first rate increase in 12 months.

The BOK was forecast to hike rates further next year as the US Federal Reserve lifted its target rate overnight to a range of 2.25-2.50 percent, widening the gap between policy rates in South Korea and the United States.

The debt-servicing ratio (DSR) for the lowest 30-percent income bracket, who borrows money from more than three financial institutions and has low credit ratings, was 67.6 percent as of the end of June.

It indicated the low-credit, low-income multiple borrowers spent 67.6 percent of income on repaying debts.

However, the country's households had room to endure the heavier debt-servicing burden as debts grew at a faster pace among the wealthy class than the poor one.

Debts per household among the top 20-percent income bracket averaged 168.71 million won ($149,500) as of end-March, up 8.8 percent from a year earlier, according to separate data jointly unveiled by the BOK, Statistics Korea and Financial Supervisory Service (FSS).

The per-household debts for the lowest 20-percent income bracket gained 4.3 percent to 15.79 million won ($14,000) in the cited period, while the figure for the 20-40 percent low-income bracket rose 2.2 percent to 37.64 million won ($33,300).

The amount of debts among the top 20-percent income bracket was more than 10 times the amount for the lowest 20-percent income bracket, accounting for 44.8 percent of the total household debts.

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