Household Debt Nears 30 Million Won

With per-household debt hovering around 30 million won, the total of household debts surpassed 458 trillion won for the first time. The aggregate amount of household debts is about four times as much as the government’s general budget of 118 trillion won.

In “Household Credit Trends in the Second Quarter of 2004” released on September 7, the Bank of Korea put the outstanding balance of household credit at 438.17 trillion won, up by 7.6 trillion won, or 1.7 percent, compared with three months ago. This represents an 18 trillion won increase, or 4.3 percent, year-on-year.

Quarter-on-quarter, it rose much larger than a 2.9 trillion won increase during the first quarter.

Household debt consists of household debt plus consumers’ purchases on credit. The debt has been continuing its upward trend as it reached 367 trillion won in 2000, 342 trillion won in 2001, 439 trillion won in 2002, and 448 trillion won in 2003. Per-household debt, which is total outstanding balance of household debts divided by the number of households as of November of last year, was 29.94 million won in March, up by 490,000 won.

Per-household debt also continues its upward swing. It reached 29.1 million won in 2001 and 29.2 million won in 2003.

Out of household credit, household loans rose 1.9 percent, or 8.7 trillion won, to 433.7 trillion won, compared with the end of March.

Meanwhile, credit purchases, such as loans by consumer credit companies, department stores, and automobile loan companies, stand at 24.25 trillion won, down 2.1 percent or 50.9 million won, led by decreasing consumer spending. The outstanding balance of credit purchases fell to 1.86 trillion won.

Household loans rose to 6.3 trillion won during the second quarter, led by loans secured by houses. Household loans from the National Agricultural Cooperative Federation, the National Federation of Fisheries Cooperatives, and other credit unions rose 3.3 trillion won.

“Rising [household] loans from banks are hardly seen as a sign of an economic recovery,” said Kim Joo-sik, the BOK’s financial statistics team leader. “An increase in loans from non-prime rate financial institutions shows that household’s credit has decreased.”

Kang-Woon Lee kwoon90@donga.com