Government and Bank of Korea Say "Impact on Korean Economy Still Limited"

The Bank of Korea Holds 'Monetary and Financial Measures Task Force' Meeting... Maintaining Vigilance Amid Increased Financial Market Volatility"

[Image source=Yonhap News]

[Asia Economy Reporter Jang Sehee] On the 17th, the government and the Bank of Korea assessed the impact on the financial and foreign exchange markets following the demolition of the Inter-Korean Liaison Office and analyzed that the market impact due to North Korean issues is limited.

On the same day, the government held a meeting of related ministers (Green Room Meeting) at the Government Seoul Office, chaired by Deputy Prime Minister and Minister of Economy and Finance Hong Nam-ki, to review the trends in the international financial markets after the demolition of the Inter-Korean Liaison Office. The government explained, "On the night of the 16th, the credit default swap (CDS) premium for South Korea slightly increased in the European and U.S. markets but then returned to the previous level (27bp, 1bp=0.01 percentage points). The won-dollar exchange rate rose by 4.8 won, but this was mainly due to the strengthening of the dollar following favorable U.S. economic indicators, indicating that the impact of North Korean issues on Korean market indicators is limited."

As of 9:30 a.m. on the same day, Korea's current CDS premium (5-year) stood at 28.284bp. In the Seoul foreign exchange market, the won-dollar exchange rate opened at 1,212.0 won, up 4.8 won. The government added, "Major investment banks (IBs) also mentioned that this news is unlikely to be a significant variable for the won exchange rate and will not have a major impact on the Korean financial market, thus expecting the ripple effect on our economy to be limited." The government stated, "Since there is a possibility of increased volatility in the financial markets going forward, we will maintain vigilance and respond promptly to market instability," and "We will also strive to communicate with credit rating agencies and others."

The Bank of Korea also held a 'Monetary and Financial Countermeasures Meeting' chaired by Deputy Governor Yoon Myeon-sik on the same day. The Bank of Korea stated, "In a situation where concerns about the resurgence of the novel coronavirus infection (COVID-19) persist, market volatility may further increase depending on the development of North Korean risks," and "We plan to closely monitor market conditions."

Meanwhile, Minister of Trade, Industry and Energy Sung Yun-mo held a first-level meeting to review key areas under his jurisdiction, including exports, energy, raw material supply, and industrial production, following the demolition of the Inter-Korean Liaison Office by North Korea.

This content was produced with the assistance of AI translation services.