South Korea’s household debt extended by deposit banks and non-banking savings institutions increased 15.40 trillion won (US$12.73 billion) in the second quarter of this year from a year earlier. The balance of household debt is estimated at more than 1,467.30 trillion won (US$1.21 trillion) as of the end of June.
Household debt from commercial banks increased 5.8 trillion won last month, larger than 5 trillion won (US$4.13 billion) in May and 5.40 trillion won (US$4.46 billion) in June. If the current trend continues, household loans are expected to surpass 1,500 trillion won (US$1.24 trillion) in the coming months.
Household debt rose 4.1 percent in the second quarter from a year earlier, surpassing the growth rate of gross domestic production and household income, which stood at 3 percent and 3.9 percent, respectively, in the same period.
There is growing concern that the continued rise in household debt could lead to “debt deflation” if it meets with the decline in asset prices, including real estate. Kim So-young, an economics professor at Seoul National University, said, “The total amount of household debt is expected to rise further, though it is already high. If asset prices fall amid a low economic growth rate and deflation, it can be a big risk factor for the economy.”