S.Korean households prefer debt repayment to consumption: report

Households in South Korea preferred repaying debts to consumption, a central bank report showed Monday.

Households' propensity to consume, or the portion of consumption to disposable income, was 0.74 in 2012, lower than an average of 0.77 in the 2003-2011 period, according to the report co-authored by two Bank of Korea (BOK) economists.

Consumption expenditure withered in the country amid worsening economic conditions at home and abroad, the report said, noting that weaker spending contributed to improved balance sheets of households.

Instead of consuming their earnings, households chose to pay back debts. The ratio of debt service to income for households continued to rise from below the 20-pecent level in 2003 to the near 30-percent mark in 2012.

The economists cautioned that consumption in South Korea weakened amid the stagnant income growth, noting that it would be necessary to prevent rapid deleveraging of households from deepening the country's economic slowdown.