Weak spending helps improve households' balance sheets in South Korean

Recent improvements in South Korean households' balance sheets mainly came as consumer spending remained subdued amid a prolonged economic slowdown, a central bank report showed Monday. After the 2008 global financial crisis until 2011, households' balance sheets had worsened due to the economic slowdown, according to the report by the Bank of Korea (BOK). But since then, it has improved mainly driven by weak consumer spending and repayment of debts, not by income growth, it added. The average ratio of households' balance sheets to their gross income reached 25.9 percent in 2012, up from 23.3 percent from the previous year, the report showed. The ratio, which came in at 24.1 percent in 2008, declined to 22.7 percent in 2010. The Korean economy grew 1.1 percent on-quarter in the second quarter, the fastest growth in more than two years, aided by an increase in government spending. But consumer spending remained lackluster, growing a mere 0.6 percent on-quarter in the second quarter. Households' debt growth has somewhat slowed amid the economic downturn, but households' high indebtedness is feared to crimp consumer spending, curbing the economic growth. Korea's total household credit stood at 961.6 trillion won (US$864.4 billion) as of end-March.