Household debt may limit policy maneuvering: finance minister

By Yonhap
  • Published : Sept 14, 2017 - 17:38
  • Updated : Sept 14, 2017 - 17:38
South Korea's top economic policymaker on Thursday expressed concerns that ballooning household debt may narrow room for policy maneuvering in Asia's fourth-largest economy when interest rates rise, while downplaying the chance of high household debt posing a threat to the overall economy.

"The risk of massive household debt will unlikely spill over to the entire economy," Finance Minister Kim Dong-yeon said in a policy meeting with Bank of Korea Gov. Lee Ju-yeol and high-ranking officials from other key financial authorities.

"But, if household credit continues its sharp growth pace, it will become a burden on the economy," he said.
South Korea`s Finance Minister Kim Dong-yeon (4th from L) and other officials pose at a policy meeting in Seoul on Sept. 14, 2017. (Yonhap)

South Korea's overall household debt has been on a steep rise to reach a record 1,388.3 trillion won as of end-June, up 10.4 percent from a year earlier.

The household debt increased at a double-digit pace, rising 11.1 percent on-year in the first quarter of the year and 11.6 percent in the fourth quarter of last year.

Although there is little chance that household debt may spark a financial crisis, many economists point out that rising debt chokes off private consumption and makes it difficult for the central bank to raise its policy rate amid global monetary tightening.

In particular, to get rising home loans under control, the government has churned out a series of regulatory measures, including strict lending regulations, but most of them seem to end in vain amid a low late trend and a boom in the local real estate market.

Kim said he will come up with fresh comprehensive measures to rein in household debt in the near future.

"There are various causes for rising household debt. We need to look into it carefully," he said. "Based on today's discussions and ideas, the government will come up with all-embracing plans on the issue." (Yonhap)