News / Asia

South Korea Faces Looming Debt Crisis

South Korean housewife buys vegetables at a market in Seoul February 1, 2011.
South Korean housewife buys vegetables at a market in Seoul February 1, 2011.
Jason Strother
South Korean economic analysts say rising household debt indicates a U.S. or European-style debt crisis is looming.

Baek Seong-jin, who runs a financial advocacy group just across the street from the South Korean National Assembly building, says he sees the signs that times are getting tough for many families.

Baek says he has seen two to three times as many people going broke and declaring bankruptcy than a year ago.  He says inflation, stagnant wages and high interest loans are reasons why his clients cannot afford to pay their bills.    

From saving to overspending

South Korea has changed from a nation that traditionally saved money to one that is overspending.  And now, experts are warning that South Korea could join the United States, Europe nations and others that are experiencing a debt crisis.    

Jeong Young-sik, an analyst at the Samsung Economic Research Institute in Seoul, says Korean households have not gotten the message yet.

"In the U.S., Japan and European countries, household debt is decreasing.  But in Korea, household debt is increasing," Jeong said.

A recent report by the Bank of Korea says household debt is nearing $600 billion.  The Organization for Economic Cooperation and Development says Korean families are spending about one-and-a-half times what they earn each month.  That is one of the highest ratios in the developed world.

Debt burden

According to Jeong, real estate and education are the two biggest expenditures that are putting households into debt.

That is the case for Cheon Sun-kyoung’s family.  Two years ago, she took out a $100,000 loan for a new apartment in a pricey Seoul neighborhood so her teenage daughter could attend what she considers to be a better school.

Cheon says the family’s budget is now very tight.  She says, since moving her family, it has been impossible to save money because they are paying off the loan.  Cheon even has to go to another neighborhood to buy groceries at cheaper supermarkets.

Jeong Young-sik says South Korea faces a similar situation as Japan did back in the 1990s.  Then, Tokyo had to bail out families who were submerged in debt.  Now, Japanese government debt is 200 percent of its GDP.

Jeong says Japan has not been able to get back on its feet, in part, because of  its low birthrate and high number of non-working senior citizens.  It is a problem that Korea is now facing.

"In the long term, the debt crisis is likely to happen in South Korea because the population will decrease, the working force will decrease.  That means, I think, the housing price will begin to fall," Jeong said.

Jeong predicts that, between 2015 and 2020, the South Korean government might need to intervene to prevent the nation from going into crisis.

Jeong says a government bail out would hurt Korea’s economic credibility and keep foreign investors away, as it has done in other nations.  

"The Korean government got a lesson from European countries, the U.S. and Japan," he said.  "The Korean government doesn’t want to increase government debt sharply."

If South Korea is to avoid that scenario, households will have to tighten their belts and start saving money again, Jeong adds.

You May Like

China May Be Biggest Winner From Ukraine Crisis

Missile sales, oil and gas shipments are among many areas that may drive Beijing and Moscow closer together in coming years More

Obama Faces Chaotic World, Limits of Power

Current foreign policy issues bring into focus challenges for US policymakers who are mindful of Americans' waning appetite for overseas military engagements More

SADC Meeting Lesotho Officials to Resolve Stalemate

Official says regional bloc has been engaged with leaders in Lesotho to resolve political disagreement that led to coup attempt More

This forum has been closed.
Comment Sorting
Comments
     
by: Yoshi from: Sapporo
September 26, 2012 4:09 AM
Yes, Japanese government has a national loan of 200 percets of its GDP. That is the second place following Zimbabwe and extreme a frontrunner among industrialized countries. But Japanese national loans are popular and bought by foreign investers including governments and Interest rate remains low. why? Japanese government is close to bankruptcy and debt crisis even now. Are other countrys' economic conditions too bad? We Japanese hope our economic power shoud be estimated propery and yen should become weeker.

In Response

by: See Meen from: New Tork
September 26, 2012 6:47 PM
This is a very timely article given all the recent popularity of the "gangnam style" video which lampoons the over-the top lifyestyle of South Korea's Gangnam district - which projects some sort of a collective cultural aspiration, which is unsustainable in the long run.

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
West Africa Ebola Vaccine Trials Possible by Early 2015i
X
Carol Pearson
August 30, 2014 7:14 PM
A U.S. health agency is speeding up clinical trials of a possible vaccine against the deadly Ebola virus that so far has killed more than 1,500 people in West Africa. If successful, the next step would be a larger trial in countries where the outbreak is occurring. VOA's Carol Pearson has more.
Video

Video West Africa Ebola Vaccine Trials Possible by Early 2015

A U.S. health agency is speeding up clinical trials of a possible vaccine against the deadly Ebola virus that so far has killed more than 1,500 people in West Africa. If successful, the next step would be a larger trial in countries where the outbreak is occurring. VOA's Carol Pearson has more.
Video

Video Survivors Commemorate 70th Anniversary of Nazi Liquidation of Jewish Ghetto

When the German Nazi army occupied the Polish city of Lodz in 1939, it marked the beginning of a long nightmare for the Jewish community that once made up one third of the population. Roughly 200,000 people were forced into the Lodz Ghetto. Less than 7,000 survived. As VOA’s Kane Farabaugh reports, some survivors gathered at the Union League Club in Chicago on the 70th anniversary of the liquidation of the Lodz Ghetto to remember those who suffered at the hands of the Nazi regime.
Video

Video Cost to Raise Child in US Continues to Rise

The cost of raising a child in the United States continues to rise. In its latest annual report, the U.S. Department of Agriculture says middle income families with a child born in 2013 can expect to spend more than $240,000 before that child turns 18. And sending that child to college more than doubles that amount. VOA’s Deborah Block visited with a couple with one child in Alexandria, Virginia, to learn if the report reflects their lifestyle.
Video

Video Chaotic Afghan Vote Recount Threatens Nation’s Future

Afghanistan’s troubled presidential election continues to be rocked by turmoil as an audit of the ballots drags on. The U.N. says the recount will not be completed before September 10. Observers say repeated disputes and delays are threatening the orderly transfer of power and could have dangerous consequences. VOA correspondent Meredith Buel reports.
Video

Video Ukraine Battles Pro-Russia Rebel Assault

After NATO concluded an emergency meeting to discuss the crisis in eastern Ukraine, the country is struggling to contain heavy fighting near the strategic port of Mariupol, on the Azov Sea. Separatist rebels are trying to capture the city, allegedly with Russian military help, and Ukraine's defense forces are digging in. VOA's Daniel Schearf spoke with analysts about what lies ahead for Ukraine.
Video

Video Growing Business Offers Paint with a Twist of Wine

Two New Orleans area women started a small business seven years ago with one thing in mind: to help their neighbors relieve the stress of coping with a hurricane's aftermath. Today their business, which pairs painting and a little bit of wine, has become one of the fastest growing franchises across the U.S. VOA’s June Soh met the entrepreneurs at their newest franchise location in the Washington suburbs.
Video

Video Ebola Vaccine Trials To Begin Next Week

The National Institutes of Health says it is launching early stage trials of a vaccine to prevent the Ebola virus, which has infected or killed thousands of people across West Africa. The World Health Organization says Ebola could infect more than 20,000 people across the region by the time the outbreak is over. The epidemic has health experts and governments scrambling to prevent more people from becoming infected. Zlatica Hoke has more.
Video

Video Asian Bacteria Threatens Florida Orange Trees

Florida's citrus fruit industry is facing a serious threat from a bacteria carried by the Asian insect called psyllid. The widespread infestation again highlights the danger of transferring non-native species to American soil. VOA’s George Putic reports.
Video

Video Aging Will Reduce Economic Growth Worldwide in Coming Decades

The world is getting older, fast. And as more people retire each year, fewer working-age people will be there to replace them. Bond rating agency Moody’s says that will lead to a decline in household savings; reducing global investments - which in turn, will lead to slower economic growth around the world. But experts say it’s not too late to mitigate the economic impact of the world’s aging populations. Mil Arcega has more.
Video

Video Is West Doing Enough to Tackle Islamic State?

U.S. President Barack Obama has ruled out sending ground troops to Iraq to fight militants of the so-called Islamic State, or ISIS, despite officials in Washington describing the extremist group as the biggest threat the United States has faced in years. Henry Ridgwell reports from London on the growing uncertainty over whether the West’s response to ISIS will be enough to defeat the terrorist threat.
Video

Video Coalition to Fight Islamic State Could Reward Assad

The United States along with European and Mideast allies are considering a broader assault against Islamic State fighters who have spread from Syria into Iraq and risk further destabilizing an already troubled region. But as VOA State Department Correspondent Scott Stearns reports, confronting those militants could end up helping the embattled Syrian President Bashar al-Assad.
Video

Video Made in America Socks Get Toehold in Online Fashion Market

Three young entrepreneurs are hoping to revolutionize the high-end sock industry by introducing all-American creations of their own. And they’re doing most of it the old-fashioned way. VOA’s Julie Taboh recently caught up with them to learn what goes into making their one-of-a-kind socks.
Video

Video Americans, Ex-Pats Send Relief Supplies to West Africa

Health organizations from around the world are sending supplies and specialists to the West African countries that are dealing with the worst Ebola outbreak in history. On a smaller scale, ordinary Americans and African expatriates living in the United States are doing the same. VOA's Carol Pearson reports.

AppleAndroid