By Kim Tae-gyu
Staff Reporter
Household debts have reached a record high of 41.3 million won on average in the midst of the ongoing financial crisis.
The Bank of Korea (BOK) announced Tuesday that outstanding household debts totaled 688.2 trillion won in December, up 57.6 trillion won or 9.1 percent from a year ago.
Among them, aggregate domestic loans stood at 648.3 trillion won, up 8.9 percent from a year ago, while credit purchases amounted to 39.9 trillion won, up 13.1 percent.
This means Korean households owed 41.3 million won on average to financial institutions or credit card firms in December, up 7.4 percent from 38.42 million won the previous year.
According to the National Statistical Office, the number of Korean households was estimated at 16.67 million last year.
Although domestic debts expanded at a rapid pace causing concern, the central bank contended the growth rate began slowing down toward the end of 2008.
The year-on-year home credit growth rate was curtailed to 9.1 percent over the final quarter of 2008, from 10.7 percent over the previous quarter.
``We learned that plastic card usage is falling and loans to homes are going down. Hence, we expect the growth of household debt not to be so fast this year,'' BOK official Lee Sang-yong said.
However, experts countered obligations are still too much and are snowballing too fast.
``It is very simple. The income of people is falling as shown by the diminishing gross domestic product (GDP) but debts are rising,'' Citigroup economist Oh Suk-tae said.
``In other words, people are forced to deal with mounting debts with reduced disposable income. This is unsustainable. In this sense, I think Korea Inc. is running a time bomb in household debts,'' he said.
Asia's fourth-largest economy suffered a 5.6 percent contraction in GDP over the final quarter of 2008 from three months earlier.
``Unlike the currency crisis a decade ago when large-sized firms generated a major cause of concern, the ongoing financial distress is about small-sized companies and households,'' Yoo Jang-hee, professor emeritus at Ewha Womans University, said.
``Accordingly, the government needs to come up with measures to support them and banks need to extend credit to them to prevent the worst-case scenario,'' he said.