Household debt most serious threat to Korean economy: BOK governorUpdated: 2014-07-17 06:23:25 (KST)
Mounting household debt.
That's what Korea's central bank chief thinks is the biggest threat to Korea's economic health.
Bank of Korea Governor Lee Ju-yeol expressed concern on Wednesday that household debt is rising at a faster rate than income growth and that loan extensions are growing, particularly in non-banking institutions.
Lee told an economic forum in Seoul that overall household debt is not expected to develop into a financial system failure as high-income earners account for 70 percent of total household debt.
But the low-income earners are having trouble paying off their bills.
Those who spend more than 40 percent of their income servicing their debts accounted for 11 percent of debt holders last year, up from 9 percent from a year earlier.
Lee was on same page with the new finance minister Choi Kyung-whan that spurring consumer spending and corporate investment are the keys to bolstering growth.
But he said lowering key interest rate leads to a rise in household debts eventually hurting purchasing power.
As for the overall economic outlook, he added that growth would recover in the third quarter of the year but there were risks of lower-than-expected growth in view of the volatility of the Korean won and the lack of confidence among businessmen and consumers.
The central bank lowered its economic growth last week by 0.2 percentage point to 3.8 percent for this year.
Song Ji-sun, Arirang News.
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