Financial Stability Situation briefing held

Bank of Korea Deputy Governor Jang Jeong-su speaks at the Financial Stability Situation press briefing Tuesday morning. [Bank of Korea]
Bank of Korea Deputy Governor Jang Jeong-su speaks at the Financial Stability Situation press briefing Tuesday morning. [Bank of Korea]

The Bank of Korea projected Tuesday that South Korea's household debt ratio will fall to the mid-to-high 70 percent range by the end of this year.

Deputy Governor Jang Jeong-su made the forecast at a Financial Stability Situation press briefing Tuesday morning. "Household debt has been a challenge our economy needed to address," he said. "The ratio had climbed to around 100 percent before beginning to decline, and the pace of that decline has accelerated this year as nominal GDP came in significantly higher."

"The household debt-to-nominal GDP ratio was in the 80 percent range in the first quarter, and is estimated to be around 81 percent in the second quarter," Jang added. "I think it could fall further by year-end — possibly into the mid-to-high 70 percent range."

Jang noted that various domestic and international reports generally place the threshold at which household debt begins to constrain consumption and growth at around 80 to 85 percent. "A decline in the household debt ratio is positive from a quantitative standpoint, but the income improvement effects vary by segment, and borrowers may not have fully benefited from those improvements," he said.

He went on to say that given risks such as expectations of rising real estate prices in South Korea, the policy stance of managing household debt should be maintained.


kimstar@heraldcorp.com
forest@heraldcorp.com