Bank of Korea governor Kim Choong-soo predicted that the household debt problem would not lead to a crisis while the growth of the Korean economy will regain its pace in or before late 2014.
He held a press conference on November 15 at the Bank of Korea Human Resources Development Center located in Incheon City and said, “Very low is the possibility of corporate and household debts damaging the stability of the financial sector as seen in the sub-prime mortgage problem of the United States and the burst bubble in the Japanese housing market.”
The amount of outstanding household liabilities is 980 trillion won (US$922 billion) as of the end of the second quarter, and is expected to break the 1 quadrillion won (US$941 billion) mark within this year. The debt growth rate reached 11.7% on an annual average between 1999 and 2012, which is more than double that of the household income at 5.7%.
“I don’t believe that the debt will result in any form of crisis,” he explained, continuing, “This is because of the structure of the liabilities in which most of the debts are owned by the top 40% of the population.”
He also said that an interest rate hike impact resulting from the Fed’s tapering of its quantitative easing policy is likely to pose a problem to the liabilities of low-income households without financial assets. He mentioned that some microeconomic fine-tuning measures are required for them.