Hong Nam-ki Warns of 'Perfect Storm'... External Risks and Household Debt Danger Increase (Comprehensive)

Warning of Rising Interest Rates and Increased Market Volatility
Four Economic Leaders' Macroeconomic and Financial Meeting
Hong Nam-ki: "Minimize Household Debt Growth"

[Asia Economy Reporter Jang Sehee] Warning signals are continuously emerging for the global economy, including South Korea. Inflation, once considered a temporary phenomenon during the economic recovery process, is likely to become prolonged as it intersects with the variable of ‘supply chain instability,’ causing economic indicators in major countries such as the United States, China, and Japan to decline simultaneously.

Domestically, the heads of economic and financial authorities expressed agreement on the need to curb household debt as much as possible and showed a firm intention to tighten financial conditions. Hong Nam-ki, Deputy Prime Minister and Minister of Economy and Finance, emphasized, "We cannot rule out the possibility of external risks emerging," adding, "It is necessary to decisively and proactively eliminate risk factors like the ‘gray rhinoceros’?risks that can be anticipated but easily overlooked."

According to the August Industrial Activity Trends released by Statistics Korea on the 30th, production, consumption, and investment all decreased last month due to the impact of the fourth wave of COVID-19. This simultaneous decline in all three indices occurred for the first time in three months since May. The overall industrial production index (seasonally adjusted, excluding agriculture, forestry, and fisheries) for last month was 111.8 (2015=100 base), down 0.2% from the previous month. Following a downturn in July when the fourth wave of COVID-19 intensified, the index recorded negative growth for two consecutive months.

On the same day, China’s National Bureau of Statistics announced that the Manufacturing Purchasing Managers’ Index (PMI) for September was 49.6, marking the lowest level in 19 months since it recorded 35.7 in February last year. Japan’s industrial production for August also fell sharply by -3.2%, significantly below the expected -0.5%.

In this context, Deputy Prime Minister Hong, Bank of Korea Governor Lee Ju-yeol, Financial Services Commission Chairman Ko Seung-beom, and Financial Supervisory Service Governor Jung Eun-bo held a macroeconomic and financial meeting at the Seoul Banking Hall to review ‘household debt’ and external risks. This was the first meeting of the four heads of economic and financial authorities in seven months since February.

Deputy Prime Minister Hong stressed, "There is a possibility of delays in resolving global supply bottlenecks, and recently, due to concerns over the U.S. debt ceiling negotiations and tapering (asset purchase reduction), domestic and foreign interest rates are rising, and volatility in stock and foreign exchange markets is increasing." Regarding household debt, he said, "We will seek a direction that suppresses the increase as much as possible while allowing borrowers who genuinely need loans to borrow within their repayment capacity." This confirmed the low likelihood of easing lending conditions. He added, "During this transitional period, meticulous and delicate policy coordination and cooperation among relevant authorities are absolutely essential."

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