Daily Management Review

Aging populations and trade wars hit South Korean households


The Central Bank of South Korea notes a decrease in the financial stability of households, despite a slowdown in borrowing growth, the Yonhap agency reported citing a regulator report sent to the country's parliament.

Unpaid household debt, including credit costs, at the end of September amounted to 1572.7 trillion won ($ 1.35 trillion), which is 3.9% more than a year earlier. This indicator is the lowest since the II quarter of 2004, when the total debt of households grew by 2.7% compared to the previous year.

Nevertheless, the financial stability of local households between July and September 2019 has worsened compared to the previous three months, the regulator notes. In particular, it reports an increase in the level of defaults of non-bank creditors.

The Bank of Korea partly associates the situation with an increase in the number of elderly people in the population. As of the end of September, the ratio of debt to disposable income of people aged 60 and older was 212.6%, which is significantly higher than the average of 164.4% and 189.8% for younger age groups.

"Despite the slowdown in household debt growth, the ratio of debt to disposable household income at the end of September increased by 2.9% compared to the same period last year to 160.3% due to lower incomes," the Korean regulator notes.

In addition, central bank experts point out that another source of problems may be a slowdown in economic growth in the country.

The total amount of borrowing by local households and companies at the end of September amounted to 194.5% of the country's nominal GDP, which is 8.2% more than a year earlier.

The fourth largest economy in Asia is expected to grow by 2% this year, which will be the slowest growth since 2009, when it was 0.7% year on year. In contrast to household debts, corporate loans grew sharply in the third quarter compared to the previous year: 8.5% to 1.153 trillion won.

source: en.yna.co.kr