[Weekly Review] During COVID-19, 'Debt Growth Rate' Surpasses 'Economic Growth'... Household Debt Exceeds GDP for the First Time

[Sejong=Asia Economy Reporter Joo Sang-don] Since the outbreak of the novel coronavirus disease (COVID-19), household debt has surged rapidly, surpassing the Gross Domestic Product (GDP) for the first time as the pace of debt increase outstripped economic growth. The biggest reasons for the rise in debt are the real estate and stock investment craze centered on people in their 20s and 30s, along with reduced interest burdens due to the low interest rate environment. Loans to businesses and self-employed individuals, supported by government policies after COVID-19, also surged sharply.

According to the "2020 Second Half Financial Stability Report" submitted by the Bank of Korea to the National Assembly, as of the end of the third quarter, the ratio of household loans to nominal GDP (annual estimate) was 101.1%, up 7.4 percentage points from the same period last year. This is the first time household loans have exceeded 100% of nominal GDP. As of the end of the third quarter, household debt stood at 1,682.1 trillion won, a 7.0% increase from the same period last year. The growth rate of household loans has been gradually expanding since the end of last year, when it was 4.1%.

◆ Public sector debt increased by 55 trillion won last year to 1,133 trillion won = Last year, public sector debt, including central and local governments and non-financial public enterprises, increased by nearly 55 trillion won, reaching the 1,100 trillion won level for the first time. The ratio to GDP also approached 60%.

On the 24th, the Ministry of Economy and Finance announced the "2019 Fiscal Year General Government and Public Sector Debt Calculation Results" containing this information.

According to the report, D3, which sums the debts of the government, non-profit public institutions, and non-financial public enterprises, totaled 1,132.6 trillion won, an increase of 54.6 trillion won from the previous year (1,078 trillion won). This increase is the largest since 2014 (58.6 trillion won). The ratio to GDP also rose 2.2 percentage points to 59.0% from 56.8% the previous year. This marks a shift from a three-year consecutive decline from 2016 to 2018 to an upward trend. The rate of increase itself rose by 2.8 percentage points in one year, the steepest since 2012.

◆ Greenhouse gas emission cap of 2.608 billion tons for the next five years starting next year = The Ministry of Environment announced on the 24th that it has selected 684 companies as allocation targets for the third phase of the greenhouse gas emissions trading scheme from next year through 2025, allocating a total allowance of 2.608 billion tons of greenhouse gas emissions.

By sector, 1.63628 billion tons were allocated to the industrial sector, which includes 449 companies such as POSCO, and 23.657 million tons were allocated to the building sector, which includes 39 companies such as Shinsegae.

The transportation sector, including 61 companies such as Kumho Express, was allocated 39.955 million tons individually. Additionally, 62.235 million tons were allocated to the waste, public, and other sectors, which include 77 companies.

◆ Complete ban on single-use plastic bags by 2030 = The government will apply the ban on single-use plastic bags to all industries starting in 2030. It will limit the thickness of plastic containers for food delivery and extend the mandatory use of transparent PET bottles beyond beverage and water bottles to other PET products such as cosmetics and detergents.

Through these measures, plastic waste will be reduced by 20% by 2025. Furthermore, in line with carbon neutrality by 2050, petroleum-based plastics will be replaced with eco-friendly bioplastics.

On the 24th, the government held a National Policy Coordination Meeting chaired by Prime Minister Chung Sye-kyun at the Government Seoul Office and finalized the "Living Waste De-plasticization Measures." The plan includes reducing plastic production at the source, cutting plastic household waste, and increasing recycling rates.

◆ Delivery workers, couriers, and self-employed to pay employment insurance premiums and receive unemployment benefits = The government unveiled a roadmap for "universal employment insurance" that will enroll all working people, including special-type workers (S-type workers) and self-employed individuals, in employment insurance. The plan is to increase the number of employment insurance subscribers to 21 million by 2025, about 7 million more than currently. The employment insurance premium system, which was centered on wage workers, will shift from "working hours" to "income" as new types of workers are included.

Minister of Employment and Labor Lee Jae-gap announced the "Universal Employment Insurance Roadmap" with these key points on the 23rd at the Government Seoul Office.

First, universal employment insurance will be expanded gradually. Employment insurance coverage for about 75,000 artists began on the 10th, and from July 1 next year, special-type workers will be included. The government will first review 14 types of special-type workers covered by industrial accident insurance, such as insurance planners, golf caddies, and delivery workers. From January 2022, the scope will expand to platform workers whose employers are easily identifiable, such as delivery and substitute drivers. This includes platform companies like Baemin Riders and KakaoT.

◆ First disaster relief fund mainly spent on groceries at marts = The emergency disaster relief funds provided by the government after the COVID-19 outbreak were mainly spent on essential consumer goods such as groceries and clothing. Sales at restaurants, where many self-employed people gather, relatively lagged, indicating that they did not benefit much from the 14 trillion won in support funds.

According to the "First Emergency Disaster Relief Fund Policy Effects and Implications" report released by the Korea Development Institute (KDI) on the 23rd, the government paid 14.2 trillion won in emergency disaster relief funds to all citizens last May to absorb the economic shock caused by COVID-19, and sales of essential consumer goods such as groceries and convenience stores increased significantly.

KDI evaluated that despite differences by industry, the overall effect of the disaster relief fund contributed to consumption recovery. It estimated that the increase in card sales due to the relief fund reached 4 trillion won, which is up to 36.1% of the input resources. Cash-receiving households also consumed 93.7% of the support funds.

This content was produced with the assistance of AI translation services.