The Central Bank of South Korea expects the financial stability problem to worsen and the debt repayment burden will increase

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FILE PHOTO: Woman wearing plastic gloves has money to buy face masks at a post office after a shortage of masks as new cases of the COVID-19 coronavirus disease are confirmed in Oi, South Korea Korea, March 4 , 2020. REUTERS / Kim Jeong Hoon

September 24, 2021

Seoul (Reuters) – South Korea’s central bank warned on Thursday that the burden of paying off debt for vulnerable households could rise sharply as interest rates rise, leaving debt in Asia’s fourth-largest economy unaffordable. He emphasized the growing adverse effects.

In a regular report on fiscal stability, BOK said revenue from South Korean domestic debt was up 172.4 percent in the second quarter, up 10.1 percent year-on-year.

Banks said the growth is a concern as many household incomes are falling amid social distancing cuts being implemented to combat COVID-19.

South Korea is hurting people in the hospitality industry by limiting the opening hours of cafes and restaurants and the number of people who can attend social gatherings.

“If the market sentiment of economic agents changes rapidly due to internal and external shocks, a sharp rise in the prices of funds concentrated in the asset market and housing could have a negative impact on financial stability,” the report said. where did it go.

The Bank of Korea raised the policy rate by 25 basis points to 0.75% in August. This is the first major increase in nearly three years and the first major Asian central bank to pull out of the pandemic monetary stimulus package.

Koreans are borrowing more than ever, and policymakers say that as interest rates rise, the debt pile becomes volatile, potentially hurting people’s purchasing power and long-term growth. I am more and more worried.

Nevertheless, the report also noted that the additional 25 basis point rate hike should have a limited interest repayment effect on both households and businesses.

(Reporting by Cynthia Kim, edited by Mr. Nabalatnam)

The Central Bank of South Korea expects the financial stability problem to worsen and the debt repayment burden will increase

Source link South Korea’s Central Bank expects financial stability problems to worsen and debt repayment burdens on the rise

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