Domestic household debt rose to 81.1 percent of GDP in 3Q15, versus 80.7 percent in 2Q15 and 79.8 percent at the end of 2014. Household debt in 4Q15 is expected to have grown further to 82.0 percent of GDP (if the 2015 GDP is found to have expanded 2.8 percent), thus growing 5.4 percent YoY, due to government's real estate stimuli that encouraged families to purchase homes. Meanwhile, consumption loans, e.g., credit card and personal loans, as well as multi-purpose loans, look set to accelerate when compared with the previous quarter.
In 2016, household debt is expected to edge up to 83.0-84.0 percent of GDP (if the GDP grows 3.0 percent), thus expanding 5.0-6.0 percent YoY, similar to 2015. Home and consumption loans will continue to be major contributors to that increase. During the 4M16, home loans will likely benefit from the above real estate sector stimuli. The main lenders will be commercial banks and specialized financial institutions. As for consumption loans, growth may be boosted by lower-middle income household demand for cash for daily spending. Meanwhile, auto loans – which used to be a major segment – may grow within limits as growth has decelerated, in line with a contraction in domestic auto sales.
Despite the expansion in the debt-to-GDP ratio, domestic household debt is decelerating versus previous average growth due to various demand and supply factors, including 1) high cumulative debt; 2) low household sentiment towards creating new debt, especially those with low debt, as they rely heavily on economic growth; and, 3) financial institutions' stringent credit policies, which will continue from 2014-2015 into 2016.
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