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S. Korea's household debt growth accelerates in June

Economy 12:00 July 09, 2020

SEOUL, July 9 (Yonhap) -- South Korea's household debt grew at an increased speed in June, while the rise in corporate loans slowed sharply from a month earlier following the government's stimulus measures aimed at supporting the pandemic-hit economy, central bank data showed Thursday.

Fresh bank loans extended to local households came to 8.1 trillion won (US$6.79 billion) in the month, up from 5 trillion won in May, according to the data from the Bank of Korea (BOK).

The amount marks the highest monthly increase posted in June since the BOK began compiling such data in 2004.

"The rise in home-backed loans accelerated from a 3.9 trillion won increase in May to 5.0 trillion won in June amid a steady increase in demand for homes," the BOK said.

In the file photo, taken April 3, 2020, people are seen filling in application forms for special loans designed to support small businesses hit by the new coronavirus outbreak at a Seoul office of the Small Enterprise and Market Service. (Yonhap)

The number of apartment transactions in Seoul doubled to about 6,000 in May from around 3,000 the previous month, while the number for Gyeonggi Province that surrounds the capital jumped to 17,000 from 12,000 over the cited period, the BOK added, noting a rise in home transactions usually leads to an increased demand for loans the following month.

In June, the rise in non-mortgage household loans also accelerated to 3.1 trillion won from 1.1 trillion won in May.

The rise in corporate loans, on the other hand, sharply slowed to a 1.5 trillion won increase in the month, compared with a 16 trillion won hike the month before and 27.9 trillion won surge in April.

Large conglomerates reduced their outstanding debt by 3.4 trillion won while smaller firms added an additional 4.9 trillion won.

"Loans to large firms dropped on reduced demand for fresh loans caused by improved conditions to issue corporate bonds," the BOK said.

Shortly after the country reported its first COVID-19 case on Jan. 20, the central bank began purchasing an "unlimited" amount of local bonds in repo operations in a clear move to boost market liquidity.

In May, the BOK also launched a new program, together with the Finance Ministry, to purchase up to 10 trillion won worth bonds from companies with substandard ratings.

The BOK said local businesses net issued 4.4 trillion won worth of bonds in June, up from 3.3 trillion won the month before.

bdk@yna.co.kr
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