November 17, 2014 13:09
Korean households are struggling to repay their debts and cutting back on expenses considered vital not so long ago, according to a survey by the Bank of Korea, Financial Supervisory Service and Statistics Korea.
As of the end of March, each household shouldered W59.94 million (US$1=W1,101) in debt, up 2.3 percent from a year earlier. But the increase was offset by a rise in household assets of 2.1 percent.
The proportion of households with debts fell 1.2 points over the same period to 65.7 percent.
The survey, which covered 20,000 households across the nation, shows that attitudes toward debt are changing. Some 64.5 percent of respondents said they will be able to repay their debts by the deadline, up 4.7 points from a year earlier. On the other hand, those who said they will not fell 1.3 points.
One reason for this is that they are drastically tightening their belts. Average annual household spending crept up fractionally from W23.03 million to W23.07 million. But wages rose a solid W1.97 million on average.
Spending on transportation and communication, where people's choices are limited, stayed roughly the same, from W2.69 million to W2.7 million and from W1.73 million to W1.75 million.
Households spent less money on private crammers for children, long seen as an absolute necessity, which dropped from W3.4 million to W3.3. million. They also scrimped on the money they sent to elderly parents who live elsewhere, down from W990,000 to W950,000.
Instead, people put more money away into pension and other funds.
Kim Kun-woo at the LG Economic Research Institute said, "Consumers are no longer spending more and more simply on expectations that their real estate assets will rise in value." He predicted consumer sentiment will remain in this bearish mode for some time since home-related costs like "jeonse" or Korean-style deposit lease are surging and they realize they must set money aside for their retirement.
- Copyright © Chosunilbo & Chosun.com