S. Korea’s household debt excessive, can hurt economic growth: BOK – 6 Aug 2017

  • South Korea’s household debt is excessive in terms of size and pace of growth and can restrict the country’s ability to grow, the central bank said 6 Aug 17.
  • The Bank of Korea (BOK) said in an assessment in its latest foreign economic focus report that the country’s household debt was equal to 92.8% GDP. This is higher than the 75-85% range that many foreign thinks tanks believe is steep, it said.
  • As of late Mar 17, the country’s overall household debt came to an all-time high of KRW1,360tr (USD1,207tr), up 11.1% from 1,224tr won from 2016.
  • The World Economic Forum estimated household debt exceeding 75% of GDP can signal danger, with the Bank for International Settlements warning that the critical limit was at around 85%.
  • It pointed out that any rise in interest rates could lead to problems in consumption and investment that can hold up economic growth.
  • The BOK, citing the BIS, said that if South Korea’s interest rates go up 2.5%, the country’s debt service ratio will jump 3.7%. This will mean more income going to service debt and less money being spent elsewhere.
  • On the positive side, the latest report said there is little likelihood of the world being rocked by another financial crisis

External Link : http://english.yonhapnews.co.kr/business/2017/08/06/0502000000AEN20170806003600320.html