Deputy Prime Minister and Finance Minister Hyun Oh-seok on Wednesday played down some economists’ worries that the nation’s household sector is facing a crisis due to its collective heavy debt.
Top financial regulatory officials ― Shin Je-yoon and Choi Soo-hyun ― and central bank governor Kim Choong-soo shared Minister Hyun’s view during the National Assembly’s hearing on the outstanding loans to the household sector in Seoul.
The policymakers reiterated that the growth pace in the financial firms’ consumer loans has evidently slowed over the past few years.
Hyun, however, told lawmakers that “the debt held by the vulnerable bracket including the self-employed has reached a critical level.”
Hyun said the Finance Ministry will unveil measures to ease the burden of self-employed households and the low-income bracket in coordination with the Financial Services Commission and the Financial Supervisory Service.
In its report to lawmakers, the FSS said commercial banks’ outstanding loans to the self-employed came to 173.5 trillion won ($150.8 billion) at the end of 2012, up 9.5 percent or 15.1 trillion won from the year before.
FSS data showed that the number of self-employed people came to 5.53 million at the end of last year, making up 22.7 percent of the nation’s total employed of 24.36 million.
During the Lee Myung-bak administration, the nation’s outstanding household debt increased by 44.8 percent, from 665.4 trillion won at the end of 2007 to 963.8 trillion won at the end of 2012, according to data from the FSS and the Bank of Korea.
The collective household debt inched down to 961.6 trillion won in March 2013.
Some ruling and opposition lawmakers claimed that policymakers have not fully reflected the debt held by the self-employed.
A day before the parliamentary hearing, the National Assembly Budget Office released statistics that the household debt surpassed 1.1 quadrillion won in 2012, which is 100 trillion won higher than the 960 trillion won reported by the government.
“When the nation accurately involves the consumer loans issued to the self-employed, the total household debt reaches 1.12 quadrillion won,” said Rep. Cho Jung-shik of the Democratic Party.
He said the figure indicates that per capita debt reached 26.4 million won.
Lawmakers pointed to snowballing loans from secondary financial firms and private moneylenders.
The nation’s household debt-to-GDP ratio reached 81 percent, exceeding the 73 percent OECD average, according to the Korea Chamber of Commerce and Industry.
Considering President Park Geun-hye’s commitment to lifting ordinary peoples’ financial status, she is expected to set herself apart from the former Lee Myung-bak administration, which has been criticized for passing down a ticking bomb.
Former President Lee failed to take concrete action to resolve the snowballing consumer debt problem.
Park’s aides have affirmed that the new government would start to grapple with snowballing household debt upon her inauguration, which could be an indication of how seriously she is taking the problem.
As pledged, the Park administration is expected to set up a fund worth some 18 trillion won, a kind of “bad bank” to take over overdue loans and other bad loans owed by credit delinquents.
By Kim Yon-se (email@example.com