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S. Korean households’ ratio of debt to disposable income touches record-high 136 pct last year
2013.04.24 09:56:20 | 2013.04.24 17:20:32
South Korea’s ratio of household debt to disposable income soared to a record-high last year since data compilation began in 2003.

The nation’s household debt jumped 5.2 percent on-year to 959.40 trillion won ($856.44 billion) late last year, but the households’ disposable income increased at a slower pace of 4.1 percent on-year to 707.33 trillion won, said the Bank of Korea (BOK) Wednesday.

[S. Korean households’ ratio of debt to disposable income touches record-high 136 pct last year] 기사의 본문 이미지

[S.Korean households" ratio of debt to disposable income] Source: Yonhap
As a result, the ratio of household debt to disposable income stood at136 percent last year.

The ratio is an all-time high since the BOK began compiling statistics in 2003.

The ratio had been forecast to swing to contraction for the first time in eight years, according to a report released by the central bank last October that cited data that showed household debt has expanded at a decelerated pace in the first half (H1) of this year.

But the households’ disposable income has grown at a more sluggish rate than predicted, and property-backed loans have increased late last year as the government cut property acquisition tax. Consequently, the ratio continued to decline.

The ratio is one of primary indicators that reveal a nation’s level of household debt as it demonstrates one’s capacity to pay back debt with disposable income.

The ratio had stood at 107 percent in 2003, and fell to 103 percent in 2004 in the aftermath of the massive default on credit card payments. Afterwards, the ratio has been on the rise for eight straight years, fueled by rising home-equity loans and sluggish growth of disposable incomes.

The mounting household debt has left little scope for the government to spur private consumption in a bid to stimulate the domestic economy.

“The nation’s household debt reached a limit,” said Governor Kim Choong-soo of the central bank in his report to the National Assembly.

[Written by Sun-ah Kim]

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