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Household debt growth accelerates in July on lower rates

All Headlines 12:00 August 13, 2019

SEOUL, Aug. 13 (Yonhap) -- Household debt growth slightly accelerated from a month earlier in July, apparently on a significant cut in interest rates that followed a key rate reduction by the Bank of Korea (BOK), central bank data showed Tuesday.

Fresh loans extended by local banks to households came to 5.8 trillion won (US$4.76 billion) in the month, up from 5.4 trillion won the month before, according to the BOK data.

Outstanding bank deposits, on the other hand, shrank by 9 trillion won, marking a sharp turnaround from an on-month gain of 22.1 trillion won the previous month.

Household debt growth accelerates in July on lower rates - 1

The central bank slashed the base rate by a quarter percentage point to 1.5 percent on July 18, marking the first rate reduction in three years.

The BOK noted the escalating trade dispute between the United States and China, as well as South Korea's own trade row with Japan, may have further weighed on the local interest rates with more now fearing a prolonged downturn for Asia's fourth-largest economy.

South Korea's exports have dipped for eight consecutive months since December, with outbound shipments again plunging 22 percent on-year in the first 10 days of the month.

The return on South Korea's three-year government bond dropped to 1.29 percent as of end-July from 1.47 percent a month earlier. It further moved down to 1.18 percent as of Monday, the BOK said.

Despite lower rates, the rise in corporate loan growth continued to decelerate last month, possibly indicating slowing corporate investment.

Fresh loans extended to local businesses came to 1.5 trillion won in July, compared with 2.1 trillion won the previous month and 6 trillion won a month before that, according to the BOK.

As of end-July, outstanding bank loans to households came to 854.7 trillion won, with outstanding corporate loans amounting to 853.3 trillion won.

bdk@yna.co.kr
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