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(News Focus) Households make up less of S. Korea's gross disposable income in 2016

2017/03/28 17:13

By Kim Kwang-tae

SEOUL, March 28 (Yonhap) -- South Korean households accounted for less of the country's gross disposable income last year, data by the central bank said Tuesday, in the latest sign of challenges facing ordinary people amid a protracted economic slowdown.

South Korea's gross national disposable income came to 1,632.6 trillion won (US$1.4 trillion) in 2016, up 4.5 percent from a year earlier, according to the Bank of Korea (BOK).

Of the total, households accounted for 56.9 percent of national disposable income, a slight decrease from 57.2 percent tallied a year earlier. The dip translates into households benefiting less from the rise in overall income, which can restrict their spending down the line.

Many economists here said that consumer spending is key to sustainable growth, especially in the face of tough trade and labor market conditions.

In comparison, the ratio of the government in the country's gross national disposable income edged up to 23.1 percent in 2016 from 22 percent in 2015, according to the BOK.

"A reason behind the decreased ratio of households in the gross national disposable income lies in that there is effectively no change in real wages as South Korea struggles to deal with a high jobless rate," said Kangwon National University economics professor Koo Chung-mo.

Koo, who heads the Korean Economic Association, said the South Korean economy should move in a way to expand the service industry and create jobs. He added there is a need to raise wages for those working for small and medium-sized enterprises (SMEs). SMEs hire the bulk of the country's workforce.

The data came as ordinary households are struggling to make ends meet in the face of growing household debt. The country's outstanding household credit -- which is composed of household loans and credit card spending -- came to 1,344.3 trillion won at the end of 2016, up 11.7 percent from a year earlier.

Adding to the woes of the South Korean economy, the country's per capita gross national income came to US$27,561 in 2016, up just 1.4 percent from $27,171 in the previous year.

Still, per capita GNI, in terms of the local currency, gained 4 percent on-year to 31.98 million won last year, the BOK said.

A weak South Korean won is partly to blame for Seoul's failure to surpass its per capita gross national income (GNI) target of $30,000. A strong won could significantly raise per capita gross national income, although such a development could hurt exports.

The value of the local currency fell 2.6 percent against the greenback in 2016, resulting in a decline in dollar-won repatriated value, according to the BOK.

Despite the exchange rate factors, the sluggish growth in per capita GNI underscored challenges facing the South Korean economy.

"South Korea's economy has slowed in recent years amid an aging population and low birthrate," a BOK official said.

The country's per capita GNI has remained under $30,000 since it breached the $20,000 mark for the first time in the country's history in 2006.

The data is a reminder that South Korea faces an uphill battle to raise its per capita GNI beyond $30,000 in the coming years.

Experts say economic growth is a key factor that can push up per capita GNI numbers.

South Korea's economic growth rate hovered around 2 percent in the last five years, except for 2014 when the economy expanded 3.3 percent.