Hello there! This is Haerim. Last month, 19th of July, I went to the ‘Foreign Press Conference’ held at the Press Center in Seoul. The conference was for discussing the current hot issue, ‘Korea’s household debt’. I got a chance to be there, and listened to the FSC’s stance on the issue.
Since the 1997 Asian Crisis, Korea’s household debt has been continuously accumulated. This means that household debt is increasing faster than the GDP growth.
Although the household debt has been slowly increasing, it is expected that the debt is still manageable by adequate policy measures. This is because 69% of the total debt is owed by high-income earners who are unlikely to have difficulties repaying the debt. So, those debts are to be repaid within the due.
A large amount of household debt is held by the self-employed. The figure shows that the number of self-employed entrepreneurs is about 5.85 million, 23 % of the total workforce. Particularly, with the baby boomer generation’s retirement these days, many small businesses are being opened up. This contributes to the increasing size of household debt as the self-employed borrow money for their start-up businesses. In response to it, FSC mentioned that such household debt should be controlled by the policy measures. One of the measures is to support the self-employed by providing business consulting programs as well as to help retirees utilize their careers.
FSC is also aware of that home buyers are influenced by the vulnerability in the real estate market. Despite the house price fall in few specific areas near Seoul, the overall value of real estate market has been considered stable since 2009. For enhanced soundness of housing market, FSC will continuously work on it through effective measures such as DTI regulations.
At last, for the low-income household as well as low-credit borrowers, further financial support and assistance will be promoted by the expansion of microcredit. This is FSC’s measure to give a hand to financially-excluded and socially-vulnerable individuals.
As you can see, there are many areas contributing to the household debt problem. FSC will continue to design its policy measures to cover these contributing factors, while protecting households with financial vulnerabilities. With this effort, the household debt is expected to be within the manageable size.