Savings Rate Continues to Fall

Savings Rate in Korea is experiencing a sharp descent.

On the 9th, according to the National Statistical Office and the Bank of Korea, the Gross Domestic Product (GDP) provision savings rate decreased each year,from 37.5 percent in 1990 to 35.5 percent in 1995, to 32.9 percent in1999, and to 32.3 percent in 2000. Such decrease continued into the first quarter of 2001 and stopped at 29 percent.

A comparison of the savings rate tendency over the course of ten years between

1990 and 1999 shows that Korea experienced a fall of 4.6 percent points while

China enjoyed a 2 per cent point increase from 38 per cent to 40 percent. In particular, Malaysia saw a significant 13 percent point increase from 34 percent to 47 percent.

Meanwhile, among advanced countries, the savings rate in the U.S. went up from

16 percent to 18 percent, while Canada experienced an increase from 21 percent to 23 percent.

England saw a fall from 18 percent to 16 percent, the Netherlands from 28 percent to 27 percent, and Sweden from 24 percent to 22 percent, but they were all less than the decrease Korea underwent. However Japan experienced a 5percent reduction from 33 per cent to 28 percent which slightly surpassed Korea`s fall during the same period.

An official from the Bank of Korea pointed out that ``Korea is currently experiencing a rise in financial demand as a result of the expansion of social security system. The rate of increase in consumption will continue to surpass the rate of increase in income and therefore the savings rate is bound to continue falling. Since long-term decrease in the savings rate could offset the balance of current accounts a counter-plan is in need.``

Park Joong-Hyun sanjuck@donga.com