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Personal savings rate falls sharply |
June 30, 2010 |
Korea’s personal savings rate is lower than both the United States and Japan, a government report revealed yesterday, raising concerns over long-term investment shortfalls and greater social security outlays.
The report by the finance ministry and Statistics Korea showed the country’s personal savings rate stood at 2.6 percent in 2008, compared with 3.8 percent in Japan and 2.7 percent in the U.S. The figure for Korea is far lower than the comparable rates in Germany and France, both of which stood at over 11 percent, the report said.
The personal savings rate is the average amount of money people save compared to their disposable incomes. It usually rises when there is an economic boom but falls during hard times. Korea’s savings rate hovered around 20 percent in the late 1990s, but fell to 8.6 percent in 2000 and plunged to 0.4 percent in 2002.
“Low numbers can exert a negative influence on investment, the country’s current account balance and compel the government to spend more on social security outlays since people do not have sufficient funds if they lose their jobs or go into retirement,” the ministry said.
The ministry, however, said that Korea’s gross savings rate was higher than those for advanced industrialized economies.
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