Soo-Hyung Lee of the Monetary Policy Committee: "Korean Economy Faces Complex Challenges to Inflation and Growth Due to Middle East Risks"

Financial Stability Report

As geopolitical risks in the Middle East become more pronounced, there is an assessment that the Korean economy is facing a complex set of challenges. It has been pointed out that there is a need to proactively prepare for different scenarios in order to address such uncertainties.

Suhyung Lee, Monetary Policy Committee member of the Bank of Korea.

Soo-Hyung Lee, Member of the Monetary Policy Committee at the Bank of Korea, stated in the Financial Stability Report on March 26 that "our economy is in a complex challenge situation, as both upward risks to inflation and downward risks to growth have increased due to the possibility of prolonged risks in the Middle East."

Lee noted, "Geopolitical risks in the Middle East could significantly increase volatility in the foreign exchange and financial markets through adjustments in domestic and international asset prices and money moves. Although the government's efforts to stabilize the real estate market have recently weakened expectations for rising housing prices, there is still a risk of accumulating financial imbalances, as housing prices in the Seoul metropolitan area continue to rise."

He emphasized that, as inflationary pressures and downside risks to growth are both intensifying and uncertainties in the Korean economy due to the situation in the Middle East have deepened, it is necessary to actively utilize scenario-based contingency plans.

He added, "As it may become more difficult for vulnerable sectors to raise funds, which could lead to an increase in non-performing assets, preemptive monitoring should be strengthened to prevent external shocks from spreading throughout the financial system. Efforts should also be made to enhance the asset soundness and liquidity response capabilities of financial institutions."

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