SEOUL, Jan. 5 (Korea Bizwire) — Debt incurred by households and self-employed businesses in South Korea is estimated to surpass 2,000 trillion won (US$1,713 billion) as of September last year, according to central bank data on Sunday.
Outstanding household loans came to 1,481 trillion won at the end of last September, up 13.6 trillion won from three months earlier, the Bank of Korea data showed.
Debt incurred by self-employed businesses reached 670 trillion won at the end of last September, up 16.3 trillion won from three months ago.
Cho Young-moo, a researcher at LG Economic Research Institute, said self-employed business owners have taken out more loans as business conditions worsened due to lackluster consumption.
Although a mountain of household debt is unlikely to pose a systemic risk to the Korean economy in the near future, the sheer size of household debt is placing the economy under pressure and constraining private spending.
In the second quarter of last year, South Korea’s household debt-to-disposable income ratio stood at 186.1 percent. The average ratio of 15 OECD member states was some 130 percent in 2018.
“Although the growth rate of household debt is slowing, the level of household debt has become significantly higher,” a BOK official said.
South Korea’s household debt grew 3.9 percent on year at the end of last September.
The on-year growth rate has been slowing steadily since the figure hit 11.6 percent in the fourth quarter of 2016, at the peak of a housing market boom.