Last year, the household surplus approached 216 trillion won, setting a record high. As uncertainty increased both domestically and internationally due to the state of emergency and the election of President Trump, consumers appear to have reduced their expenditure. The decrease in the supply of dwellings also affected funding sources such as housing loans.
Corporations filled their coffers in preparation for uncertainty. Last year, corporations reduced bond and stock issuance, cutting their total net funding by more than 55 trillion won compared to the previous year. However, government net funding expanded to twice the amount from the previous year due to expenditures increasing more than revenues.
According to the '2024 financial circulation (provisional)' report announced by the Bank of Korea on the 10th, the net fund management of households and non-profit organizations recorded 215.5 trillion won, an increase of 55 trillion won from the previous year. This is the highest level since the statistical compilation in 2009.
Net fund management is the amount left after subtracting loans from financial institutions (funding) from the money managed through deposits, bonds, insurance, and pension reserves (investment). It is interpreted as surplus funds available for economic agents. If funding exceeds management, resulting in a negative surplus, it is expressed as net funding.
Last year, the household fund management scale was 266.1 trillion won, up 71.3 trillion won compared to the previous year. While deposits in financial institutions decreased, the increase in equity securities, investment funds, insurance, and pension reserves influenced this growth. In contrast, the funding scale was only 50.6 trillion won, seeing an increase of 16.3 trillion won from the previous year.
The Bank of Korea explained that the reduction in household funding was due to increased domestic and international uncertainty squeezing consumer sentiment and a decrease in the supply of new dwellings. According to Statistics Korea, the household expenditure growth rate slowed from 6.1% in 2023 to 3.2% last year. Meanwhile, during the same period, the new supply of apartments in Seoul decreased from 37,000 units to 28,000 units, while the national supply dropped from 367,000 units to 363,000 units.
As household funding decreased, the ratio of household debt to nominal gross domestic product (GDP) fell from 90.8% at the end of the third quarter of 2024 to 90.1% at the end of last year, marking a decline of 0.7 percentage points. This marks the fifth consecutive quarter of decline. Compared to the end of 2023 (93.6%), it decreased by 3.5 percentage points, marking a decline for the third consecutive year.
Corporations (non-financial) had a net funding condition where funding exceeded management. Last year, the scale of net funding was 65.5 trillion won, down 55.1 trillion won from the previous year (109.4 trillion won). This is the lowest level since 2019 (52.9 trillion won).
This was influenced by the rapid increase in fund management compared to funding. Corporations' fund management surged from 9.3 trillion won in 2023 to 68.7 trillion won last year, driven by increased deposits in financial institutions and foreign direct investment. Although funding also increased from 118.6 trillion won to 134.2 trillion won, the increase was smaller than that of fund management.
Kim Yong-hyun, head of the financial circulation team at the Bank of Korea, noted, "As domestic and international economic uncertainty has increased, the growth in corporate investment has slowed. It appears that in financial markets, they are preparing for economic crises by reducing bond and stock issuance while increasing deposits."
In contrast, the general government increased its expenditure scale. Last year, government funding was recorded at 74.8 trillion won, an increase of 1.8 trillion won compared to the previous year, while fund management decreased from 56.1 trillion won to 35.9 trillion won due to reduced deposits in financial institutions. Consequently, the government's scale of net funding expanded from 17 trillion won to 38.9 trillion won.
Last year, the combined net fund management scale of households, corporations, and the government recorded 116.6 trillion won, doubling that of the previous year (46.8 trillion won). This is the highest level since 2016 (119.9 trillion won).
As of the end of last year, Korea's non-financial sector (households, corporations, and government) recorded financial assets of 1,226 trillion 300 billion won, an increase of 626.2 trillion won from the previous year. Financial liabilities increased by 303.6 trillion won, totaling 7,711 trillion won. The net financial worth of the non-financial sector stands at 4,549 trillion won.