Personal debt is growing faster than the economy

Household debt rose faster than economic growth in the second quarter, raising concerns of over-leveraging by individual borrowers and its impact on domestic consumption, data showed Sunday.

The household debt in Korea, Asia’s fourth-largest economy, was estimated at 146.7 trillion won ($121.1 billion) as the end of June, adding 15.4 trillion won from three months earlier, according to the Bank of Korea.

Private lending gained 3 trillion won in the first quarter amid shrinking housing sales, but it swelled in the second quarter on the back of a recovery in the real estate market.

Household debt rose at an even faster clip in July compared with the previous two months, adding 5.8 trillion won last month, the bank said.

If the current trend continues, private loans are expected to break 1,500 trillion won in the coming months.

Experts are raising concern over the ballooning household debt at a time of low growth as it could hold back domestic consumption, which could further weigh on the economy.

Household debt rose 4.1 percent in the second quarter from a year earlier, surpassing the growth of the gross domestic production and household income, which stood at 3 percent and 3.9 percent, respectively, in the same period.

Yonhap