“Technically speaking, Korean economy is not deemed to have entered deflation. Although consumer prices have continued to stay in the meager 1-percent range for nearly two years, this trend is largely caused by supply factors such as downward prices of agricultural products and global energy goods. The underlying inflation which indicates basic price pressure in terms of demand is still in the early 2 percent level.”
“I must admit that, household lending really surged in August, nearly tripling compared to the increased level for the period of January through July of this year. However, most of the loans were from banks and those from non-banking institutions were decreased significantly. Besides, you should note that most of the increased bank loans were from the government-supported mortgage loans, which the Korea Housing Finance Corporation is responsible for now. These facts add up to my conclusion that Korea is not mired in deflation for now.”
Lee Ju-yeol, governor of the Bank of Korea, at a news conference after the Monetary Policy Committee meeting on September 12.
Lee Ju-yeol, governor of the Bank of Korea, said that he is not worry about the household loans for now and reaffirmed that the Korean economy is not mired in deflation yet. (image: 8 Kome/flickr)
SEOUL, Sept. 16 (Korea Bizwire) – Against the worries on the recently skyrocketed household loans and the possible deflation of the Korean economy, Lee Ju-yeol, governor of the Bank of Korea, said that he is not worry about the household loans for now and reaffirmed that the Korean economy is not mired in deflation yet.
After the government’s real estate revitalization policy, which was announced on August 1, the mortgage loans increased by 4.7 trillion won (US$4.5 billion) during last August alone, the largest rise in 14 months and three times higher than the monthly average of 1.5 trillion from January to July this year.
On this situation, Lee admitted that the household loans skyrocketed in August but tried to relieve the worries by saying most of the loans were from banks and those from non-banking institutions were decreased significantly.
Meanwhile, on some economists’ views that the Korean economy has fallen into deflation, he refuted the argument by taking some factors indicating that it is not in deflation. However, he said that the central bank would take extra caution for the Korean economy not to fall into the depressionary trap.
By John Choi (johnchoi@koreabizwire.com)
