ID :
57934
Tue, 04/28/2009 - 15:21
Auther :
Shortlink :
https://www.oananews.org//node/57934
The shortlink copeid
S. Korean households' debt repayment ability weakens
SEOUL, April 28 (Yonhap) -- South Korean households' ability to repay debt
declined in 2008 on stagnant income growth, but massive loan defaults are
unlikely due to falling interest rates, the central bank said Tuesday.
The ratio of households' financial debt to disposable income rose to 1.40 in
2008, compared with 1.36 the previous year, the Bank of Korea (BOK) said in its
semi-annual financial stability report.
The figure has been on an upward trend since 2004, when the ratio stood at 1.13,
according to the central bank.
"Korean households' ability to service debt declined last year as their financial
liabilities continued to rise while the slumping economy hurt the job market and
asset prices fell," the BOK said.
But it also noted that falling interest rates sharply eased the burden of
interest payments on households, raising the prospect that a massive default on
liabilities was not likely.
The ratio of interest payments to disposable income is estimated to reach 5.8
percent this year, down from 7.5 percent at the end of 2008, it added.
The report comes as the BOK has made six consecutive rate cuts into February
totaling 3.25 percentage points to a record low of 2 percent in a bid to bolster
the slowing economy.
Rising debt and faltering real income, coupled with falling asset values, are
dealing a blow to households' ability to repay their debts, which amounted to 802
trillion won (US$595 billion) as of the end of last year, up from 743 trillion
won in 2007, the report showed.
The South Korean economy is forecast to contract 2.4 percent this year, the worst
performance in 11 years, buffeted by falling exports and flaccid domestic demand.
"But given deteriorating income-generating conditions and lower savings rates,
households' ability to cope with debt does not seem to be strong in the long
term," it added.
Meanwhile, the BOK also said that Korean companies' ability to repay debt
weakened last year mainly due to worsening profitability and financial soundness
amid the economic downturn, raising the possibility of corporate bankruptcies.
In 2008, larger companies saw their ratio of debt to equity capital top 100
percent for the first time since 2003. The ratio came in at 102.5 percent last
year, up from 82.6 percent a year ago, as Korean conglomerates borrowed more to
finance mergers and acquisitions and sold bonds.
sooyeon@yna.co.kr
(END)
declined in 2008 on stagnant income growth, but massive loan defaults are
unlikely due to falling interest rates, the central bank said Tuesday.
The ratio of households' financial debt to disposable income rose to 1.40 in
2008, compared with 1.36 the previous year, the Bank of Korea (BOK) said in its
semi-annual financial stability report.
The figure has been on an upward trend since 2004, when the ratio stood at 1.13,
according to the central bank.
"Korean households' ability to service debt declined last year as their financial
liabilities continued to rise while the slumping economy hurt the job market and
asset prices fell," the BOK said.
But it also noted that falling interest rates sharply eased the burden of
interest payments on households, raising the prospect that a massive default on
liabilities was not likely.
The ratio of interest payments to disposable income is estimated to reach 5.8
percent this year, down from 7.5 percent at the end of 2008, it added.
The report comes as the BOK has made six consecutive rate cuts into February
totaling 3.25 percentage points to a record low of 2 percent in a bid to bolster
the slowing economy.
Rising debt and faltering real income, coupled with falling asset values, are
dealing a blow to households' ability to repay their debts, which amounted to 802
trillion won (US$595 billion) as of the end of last year, up from 743 trillion
won in 2007, the report showed.
The South Korean economy is forecast to contract 2.4 percent this year, the worst
performance in 11 years, buffeted by falling exports and flaccid domestic demand.
"But given deteriorating income-generating conditions and lower savings rates,
households' ability to cope with debt does not seem to be strong in the long
term," it added.
Meanwhile, the BOK also said that Korean companies' ability to repay debt
weakened last year mainly due to worsening profitability and financial soundness
amid the economic downturn, raising the possibility of corporate bankruptcies.
In 2008, larger companies saw their ratio of debt to equity capital top 100
percent for the first time since 2003. The ratio came in at 102.5 percent last
year, up from 82.6 percent a year ago, as Korean conglomerates borrowed more to
finance mergers and acquisitions and sold bonds.
sooyeon@yna.co.kr
(END)
