SEOUL - The debt burden carried by South Korean households edged up this year as debts grew at a brisker pace than incomes, a survey said on Tuesday, putting pressure on policymakers aiming to maintain a steady recovery in Asia's fourth-largest economy.
Total debt at South Korean households grew by an average 6.8 per cent to 58.18 million won (S$68,500) as of March this year, of which 39.67 million won was in the form of financial debt, the survey by the central bank and two top local authorities found.
In comparison, annual disposable income rose by 4.9 per cent in 2012, resulting in the ratio of financial debt to disposable income rising to 108.8 per cent in this year's survey, from 106.0 per cent in 2012.
"Pressure on households has grown as South Koreans have increased their debt in comparison to the assets they carry, resulting in worse financial soundess," said an official at the Bank of Korea.
South Korean households carry one of the highest debt burdens in the world as most are saddled with large mortgages - the survey showed 66.4 per cent of households' tangible assets were in the form of real estate.
Self-employed workers carried the largest debt burden with an average 88.59 million won as of March 2013, compared with 79.60 million won last year as more retired babyboomers return to the workforce to make a living.
Despite having one of the most heavily-leveraged household sectors in the world, South Korea's economy isn't expected to unravel anytime soon as economic conditions are expected to pick up next year.
The survey found 60.7 per cent of South Korean households carry financial debt, while 56.8 per cent of all households said their debt status was not expected to change within a year.
"I don't see the household debt issue blowing up into crises that were seen in the US or Japan," Bank of Korea Governor Kim Choong-soo said to reporters during a central bank event last week, referring to the US subprime mortgage crisis in 2008 and Japan's asset bubble collapse in the early 1990s.
The Bank of Korea expects South Korea's export-reliant economy to grow by an annual 3.8 per cent next year, with domestic consumption hoped to grow along with it.
The survey, the second of its kind, was carried out by the Bank of Korea, Statistics Korea and the Financial Supervisory Service throughout 2012 and partially during the first quarter of 2013 in 20,000 households across the nation.
The numbers will be revised once each year after the first results are published, the joint report said.