Household Debt Growth Slows, but Corporate Loans Surge by Highest Amount in April

A temporary closure notice is posted at a shop in Myeongdong, one of the most popular shopping areas in Seoul, on April 29, 2020, amid the coronavirus pandemic. (Yonhap)

SEOUL, May 12 (Korea Bizwire) — Household debt growth in South Korea slowed, but corporate loans spiked by the largest amount in history amid the growing fallout from the new coronavirus outbreak, central bank data showed Tuesday.

Fresh bank loans extended to local households came to 4.9 trillion won (US$4 billion) in April, according to the data from the Bank of Korea (BOK).

The amount marks a sharp decline from a 9.6 trillion-won gain the previous month that marked the largest-ever monthly increase since the BOK began compiling such data in 2004.

The drop was partly attributed to the COVID-19 outbreak that forced people to stay home, leading to a cut in their spending.

In April, non-mortgage loans dropped by 100 billion won, marking a turnaround from a 3.3 trillion-won increase the month before, according to the BOK.

“Other (non-mortgage) loans shrank slightly due to a drop in demand for settlement funds caused by a decline in consumption,” it said.

The combined sales of 26 major retailers here dropped 3.3 percent on-year in March, with sales of offline stores plunging 17.6 percent, government data showed earlier. Comparative figures for April have yet to be released.

Home-backed loans, including mortgages, added 4.9 trillion won last month, falling slightly from a 6.3 trillion-won gain in March.

Corporate loans, on the other hand, jumped by the largest amount ever, the BOK data showed.

Fresh bank loans to local businesses amounted to 27.9 trillion won in April, spiking from a 18.7 trillion-won increase the previous month and marking the largest monthly rise since June 2009, when the BOK began compiling such data.

Loans extended to large business groups came to 11.2 trillion won, growing slightly from 10.7 trillion won in March, while loans extended to smaller firms spiked 16.6 trillion won from 8 trillion won over the cited period.

Debt sales by local businesses net increased 100 billion won in April, a turnaround from a net 500 billion won drop the previous month, according to the BOK.

(Yonhap)