Governor Lee Ju-yeol: "Korean Economy Recovery Will Take Considerable Time... Considering Alternatives for Monetary Policy"

[Image source=Yonhap News]

Lee Ju-yeol, Governor of the Bank of Korea, said on the 17th regarding the recovery of the economy from the novel coronavirus disease (COVID-19), "Since the spread of COVID-19 worldwide is not calming down easily, I am worried that it will take quite some time for our economy to enter a full-fledged recovery."

On the same day, Governor Lee stated this in an interview for the 70th anniversary documentary released by the Bank of Korea, saying, "Although the situation in our country has considerably calmed down, the spread of COVID-19 in other countries is not subsiding."

He explained, "As social distancing has become normalized, economic activities of our economic agents inevitably shrink, which leads to sluggish consumption. Not only in our country but also globally, including the United States and Europe, the economy has significantly slowed down, and as a result, our major growth engine, exports, has sharply declined."

Governor Lee also shared his concerns about monetary policy and the systems managing inflation targets.

He said, "Central banks basically operate monetary policy mainly through interest rates, but when interest rates are as low as they are now, the issue is whether we can use some active measures to conduct monetary policy and guide the real economy in the intended direction. In a situation where we are worried not about inflation but rather deflation (a decline in prices amid economic recession), we are also facing the question of whether the price stability target system is truly suitable for reality and how it should be changed."

Regarding debt management, he expressed concern, saying, "If household debt becomes excessive, consumption shrinks due to repayment burdens, and in the case of companies, excessive debt causes difficulties in financing and repayment. This can lead to problems affecting investment and employment." He emphasized, "Our primary goal is to help economic agents maintain their debt repayment capacity."

He added, "We will detect potential vulnerabilities in advance to prevent a significant increase in household and corporate debt by sharing information with the government so that effective measures to prevent the accumulation of debt can be implemented. If the financial market becomes unstable, the Bank of Korea will inject emergency liquidity into the financial market as a lender of last resort to stabilize the financial system."

Regarding concerns about the entrenchment of low growth, he stated, "Looking back over about ten years, the average growth rate of our economy was only 3.3%. Compared to the 7% range in the 1990s or 5% in the 2000s, it is indeed quite low." He continued, "Our main industries have already entered a mature phase, competition with emerging countries such as China is becoming increasingly fierce, and the rapid progress of low birth rates and aging are also major factors lowering our economic growth rate."

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