SEOUL, Oct. 31 (Korea Bizwire) – More South Koreans have canceled their installment savings accounts before maturity this year, industry data showed Monday, an apparent sign that an increasing number of ordinary people are feeling the pinch from the country’s sluggish economy.
The early cancellation rate of installment savings accounts at Shinhan, KB Kookmin, KEB Hana and three other major banks came to 45.2 percent as of end-September, up sharply from 42.6 percent the previous year.
Industry sources said households, when they expect worsening finances, tend to terminate their insurance policies first, then stop putting money into investment funds and finally, cancel installment savings programs.
“Installment savings accounts are the last bastion of protection and people tend to hold them until the last minute,” a bank official said. “The rise in the early cancellation rate can be seen as an indication that households are facing more difficult financial situations.”
The increase comes as South Korea, Asia’s fourth-largest economy, remains trapped in a low-growth phase, stung by slumping exports and stubbornly weak domestic demand. In addition, the country has been gripped by snowballing household debt.
According to central bank data last week, the local economy grew at a slower pace in the third quarter of this year than three months earlier because of decreased demand and facility investments.
In the July-September period, the country’s gross domestic product gained 0.7 percent from the previous quarter, decelerating from a 0.8 percent on-quarter expansion three months earlier, according to preliminary the data by the Bank of Korea.
South Korea’s overall household debt jumped 11 percent on-year to 1,257 trillion won (US$1.1 trillion) as of end-June, despite stricter lending rules, according to separate central bank data.