Per Household Debt Reaches 30 Million Won

Korean households had an average debt of 30 million won last year. As 30 million won is over 80 percent of the average annual income of urban workers in 2003, experts believe it is a major stumbling block to consumption recovery.

The Bank of Korea (BOK) reported on Thursday that the total household debt in late 2003, which includes household borrowing, stood at 447.6 billion won, rising 1.9 percent, or 8.5 trillion won compared to that of the previous year.

Household credit, which stood at 266.9 trillion won in 2000, is continually increasing, jumping to 341.7 trillion won in 2001 and 439.1 trillion won in 2002.

In particular, a great number of people who were not qualified to receive loans from major commercial banks received loans from credit unions, such as the National Credit Union and the Korean Federation of Community Credit Cooperatives. Households borrowing from credit unions surged to 28.9 percent.

Debt per household has risen from 29.15 million won in late 2002 to 29.26 million won. Debt per household was 18.27 million in late 2000 and 23.03 million in late 2001.

Last year’s figure of 35.3 million won is 83 percent of the average annual earning of urban workers, according to the National Statistical Office.

“Although the rate of outstanding household credit slowed down considerably last year due to a retrenchment in consumption and tougher restrictions on consumer lending, the household debt is still a roadblock that slows down the recovery of domestic consumption. In addition, a possible hike in interest rates or decline in income would weaken the balance sheets of households,” said Jo Seong-jong, a senior BOK official.

Joong-Hyun Park sanjuck@donga.com