[Economic Outlook] Will the Bank of Korea Raise the Base Interest Rate to 1.0%... 'Bombshell' Comprehensive Real Estate Tax Bills Sent

[Image source=Yonhap News]

[Sejong=Asia Economy Reporter Kwon Haeyoung] This week, the biggest points of interest are whether the Bank of Korea will raise the base interest rate and the issuance of the 'tax bomb-level' comprehensive real estate tax notices.

According to the Ministry of Economy and Finance on the 21st, a briefing on the 2021 housing comprehensive real estate tax notices will be held on the 22nd. This is a procedure to inform the public about various statuses related to the comprehensive real estate tax sent on the same day, including the number of taxpayers subject to the tax, the taxable amount, and answers to major questions.

This year's comprehensive real estate tax is expected to increase significantly due to the combined effects of the overall rise in housing prices leading to a higher tax base, an increase in the tax rate, the realization of official property prices, and the rise in the fair market value ratio. The Democratic Party's Special Committee on Real Estate predicted that the total number of taxpayers will increase by 100,000 from last year's 665,000 to 765,000, and the housing-related comprehensive real estate tax revenue will nearly quadruple from last year's 1.459 trillion won to 5.7363 trillion won. Some forecasts suggest that due to the sharp rise in housing prices, the number of taxpayers subject to the housing comprehensive real estate tax this year will exceed 800,000.

On the 24th, Statistics Korea will announce the population trends for September. As of August, the number of births hit a record low for the month. Deaths outnumbered births, continuing the population decline for the 22nd consecutive month. From January to August this year, the population decreased by about 22,000.

[Image source=Yonhap News]

On the 25th, the Bank of Korea's Monetary Policy Committee will hold a meeting to discuss the direction of monetary policy and whether to raise the current base interest rate of 0.75%. At the Monetary Policy Committee meeting on August 26, the base rate, which had been at a record low of 0.5% due to the COVID-19 crisis, was raised by 0.25 percentage points for the first time in 15 months.

Bank of Korea Governor Lee Ju-yeol stated at the national audit on the 15th of last month, "I expect there will be no major difficulties even if the base rate is raised in November," effectively signaling an additional rate hike this month. However, some argue that considering the risk of economic downturn, such as the third-quarter economic growth rate falling to 0.3% (quarter-on-quarter), caution should be exercised regarding a rate hike, so the possibility of maintaining the current rate cannot be ruled out.

The Bank of Korea will also announce revised economic forecasts on the 25th. The key point will be how much the existing forecasts for this year's real GDP growth rate (4.0%) and consumer price inflation rate (2.1%) will be adjusted.

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