Outstanding Household Debts Reach 30 Million Won

Outstanding household debt has reached 30 million won per household and the total debt accounted for 75% of the gross domestic product (GDP). It is feared that an extended economic slowdown will increase bankrupt households, causing serious socio-economic problems.

According to a report, ‘Trend of Household Credit for 2002,’ released by the Bank of Korea (BOK) Tuesday, the balance of household debts as of late last year amounted to 439 trillion won, 2.4 times that at the end of 1998 totaling 183.6 trillion won.

Outstanding household debts accounted for 75.3% of the GDP as of September last year.

The balance has increased from 183.6 trillion won at the end of 1998 to 266.9 trillion won at the end of 2000, and to 341.7 trillion won at the end of 2001. When converting to debt for each household, the amount doubled to 29.15 million won at the end of last year from 13.21 million won at the end of 1998.

The surge in household debts is attributed to the sharp rise in house mortgage loans, and credit care purchases and cash advances from credit card companies.

Outstanding household debts reached 391.1 trillion won at the end of last year, 2.3 times that of the end of 1998, which was 165.8 trillion won. The balance of credit card companies and installment financial institutions rose to 47.9 trillion won from 17.8 trillion won at the end of 1998.

Bank loans among household debts grew to 222 trillion won at the end of last year, 4.2 times that at the end of 1998, while cash advances and card purchases jumped to 37.2 trillion won from 6.4 trillion won in 1998. “Due to the government’s stricter measures to curb household debts, the increasing rate has been slowing since the second half of last year,” Choi Young-yup, Director of Currency and Financial Statistics of the BOK, said.

Kwu-Jin Lim mhjh22@donga.com