South Korean consumers are tightening their wallets amid the rising burden of household debt and negative economic outlooks.

According to data from Statistics Korea on Tuesday, the country’s retail sales index declined in all 17 provinces and metropolitan cities in the fourth quarter of 2024 and the full year of 2024. This is the first time that the index has dropped across all regions nationwide since relevant statistics became available in 2010.

The retail sales index fell 6.6 percent in Ulsan in 2024 from a year ago, 5.7 percent in Gyeonggi, 5.3 percent in Gangwon, 4.2 percent in North Gyeongsang, 4.1 percent in North Jeolla, 3.3 percent in Daejeon, 3.1 percent in South Gyeongsang, and 2.5 percent in Gwangju. These eight regions saw their steepest drops since 2010, while Seoul and Incheon saw significant declines of 4.4 percent and 5 percent respectively.

The national average retail sales index has also declined for 11 consecutive quarters.

Six regions - Seoul, Daegu, Gwangju, Sejong, Gyeonggi, and South Jeolla - have particularly experienced a continuous decline for three years in a row.

The issue of concern is that the nationwide decline in the retail sales index is accelerating from -0.3 percent in 2022 to -1.5 percent in 2023 and -2.2 percent in 2024, indicating a deepening slump across the country.

“The biggest decline was seen in specialty retail stores that mainly sell semi-durable goods such as home appliances, furniture, mobile phones, and computers,” a Statistics Korea official said.

Household debt, meanwhile, continues to rise despite the financial authorities tightening lending regulations.

Household debt showed a moderate upward trend between 2022 and 2023 before accelerating in 2024. Household credit rose 41.1 billion won ($28.5 million) in the first quarter of 2022, 5.5 trillion won in the second quarter, and 2.7 trillion won in the third quarter. It fell 3.6 trillion won in the fourth quarter. In 2024, household credit rose 13.4 trillion won in the second quarter, 18.5 trillion won in the third quarter, and 13 trillion won in the fourth quarter.

Borrowers increasingly turned to mortgage loans, shifting from commercial banks to non-banking institutions, raising concerns about the need for stricter risk management.

While the government’s macroprudential policies, such as the second-phase stress debt service ratio (DSR) introduced in September 2023, have significantly curbed the growth of mortgage loans in the banking sector, mortgage lending from non-bank institutions has surged.

Mortgage loans from deposit banks grew by 7.3 trillion won in the fourth quarter of 2024, which was only one-third of the growth in the previous quarter.

On the other hand, mortgage loans from non-bank deposit-taking institutions - including savings banks, credit cooperatives, mutual finance institutions, community credit cooperatives, and postal savings - surged sevenfold from 900 billion won in the third quarter to 7 trillion won in the fourth quarter.

However, the Bank of Korea noted that an increase in household lending is a natural trend in line with economic growth, highlighting the ratio of household credit to gross domestic product (GDP).

As household debt rises and consumption declines, the number of self-employed individuals unable to repay their loans is also growing. According to NICE Information Service, 155,060 out of 3,358,956 individual business owners with outstanding loans were in arrears for over three months as of the end of 2024, up 35 percent from a year ago.

The total amount of delinquent loans exceeded 30.72 trillion won, up more than 7 trillion won in just one year.The number of delinquent borrowers aged 60 and older in particular surged from 20,795 to 31,689.

“The government should ease lending regulations to improve liquidity for the private sector, in addition to injecting fiscal support into large-scale social overhead capital (SOC) and construction projects,” Kim Jung-sik, professor emeritus of economics at Yonsei University, said.

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