Choo Kyung-ho: "If Interest Rates Don't Rise, Exchange Rate Instability Will Continue... Next Year's Economy Will Be Worse"

Deputy Prime Minister Choo Kyung-ho Has Lunch with Reporters in Washington DC
On the Previous Day's BOK Big Step, "I Trust the Monetary Policy Committee's Judgment"
Our Economy Is Still Stable but Next Year's Economy Will Worsen Further

Deputy Prime Minister and Minister of Economy and Finance Choo Kyung-ho delivers a greeting at the Korea Economic Briefing held on the 11th (local time) at the Lotte Palace Hotel in New York, attended by investors based in New York. (Photo by Ministry of Economy and Finance)

[Asia Economy Washington DC=Reporter Moon Jewon] Deputy Prime Minister and Minister of Economy and Finance Choo Kyung-ho commented on the Bank of Korea's decision to implement a 'big step' (a 0.50 percentage point increase in the base interest rate) the previous day, saying, "I trust the Monetary Policy Committee's judgment," and added, "If interest rates are not raised, exchange rate instability will continue." However, he emphasized that support measures focusing on vulnerable groups will continue to be pursued, as the interest burden on ordinary citizens and the possibility of an economic recession inevitably increase.

On the 12th (local time), Deputy Prime Minister Choo met with reporters in Washington DC to explain the Bank of Korea's rate hike and the future economic outlook. Visiting Washington DC to attend the G20 (Group of Twenty) Finance Ministers' Meeting and the International Monetary and Financial Committee (IMFC) meeting, Choo noted that although other countries do not yet view Korea's economic situation as bad, the pain experienced by ordinary citizens due to the rate hike, the economic downturn, and increased uncertainty remain concerns.

He generally agreed that the Bank of Korea's decision to implement the second-ever big step was unavoidable. Choo said, "The exchange rate has risen significantly recently, and if interest rates are not raised, exchange rate instability will continue," adding, "Exchange rate stability, base interest rates, and price stability move together, and since the central bank shares my view, they raised the rate by 50 basis points (1bp=0.01 percentage point) yesterday."

Although a sharp increase in interest rates inevitably raises concerns about economic slowdown and increases the interest burden on ordinary citizens, it was an unavoidable choice given the urgent need for price stability. Choo stated, "The Monetary Policy Committee will also consider vulnerable areas carefully," and added, "I trust the Monetary Policy Committee's judgment. We communicate regularly with the Bank of Korea during our work, and there are no disagreements on any issues."

However, Deputy Prime Minister Choo pointed out that the economy will worsen in the first half of next year compared to this year, emphasizing the need for structural improvements through deregulation. He said, "The massive economic instability and volatility will continue until next year," and added, "We don't know where or in what form volatility will stress us, so to survive, we must build a robust economy."

Deputy Prime Minister and Minister of Economy and Finance Choo Kyung-ho is answering investors' questions at the Korea Economic Briefing held on the 11th (local time) at the Lotte Palace Hotel in New York, attended by investors based in New York. (Photo by Ministry of Economy and Finance)

To this end, Choo believes that strengthening debt management and promoting regulatory innovation are necessary. He said, "If debt increases in the Korean system, foreign investors will gradually turn their backs," adding, "Our economy still has a certain level, so even though household debt is high, we can endure it."

Deputy Prime Minister Choo also mentioned that during a Korean economic briefing held in New York the previous day for overseas investors, questions about household debt management were raised. He said, "Although household debt has increased as a trend, the recent growth rate is being managed stably, and real estate regulations will continue to be consistently enforced," he explained.

Choo stated that even if the economy worsens next year, recovery should be achieved through tax reductions rather than fiscal expansion. He emphasized, "Borrowing money to inject more funds may temporarily stimulate the economy, but the effect is small and the debt burden increases," adding, "We need to move toward reducing taxes and increasing tax expenditures, which requires cooperation from the National Assembly."

Deputy Prime Minister Choo said, "The overseas perspective is still that Korea is holding up relatively well," but added, "However, risks continue to exist everywhere, and it is necessary to monitor how they might expand further. Domestically, problems may arise among vulnerable groups and small and medium-sized enterprises. We will take measures to prevent sound companies from collapsing due to funding issues."

Washington DC=Reporter Moon Jewon

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