Washington, D.C., Oct. 24 (Korea Bizwire) – The director of the IMF’s Asia and Pacific Department, Rhee Chang-yong, has said though South Korea faces high household debt levels compared to other OECD member states, the level of indebtedness does not pose an imminent threat.
Speaking to the press on Monday at the Korean Cultural Center in Washington D.C., Rhee said the high level of household debt in South Korea isn’t likely to become a risk factor for the South Korean economy in the near future, citing the fact that most of the debt belongs to the rich.
The senior official warned, however, about the notable rate at which household debt in the country has been growing since the Asian financial crisis, and said that the IMF is monitoring the situation while encouraging the government to take action to slow down household debt growth.
On the South Korean government’s economic policy, Rhee said to the correspondents in Washington D.C. that fiscal retrenchment, which could hinder economic growth, is not ideal, while making it clear that the IMF isn’t encouraging lax financial management.
“What the IMF argues is that focusing on lowering economic growth isn’t always good. Considering pressing issues such as senior poverty in a decade, raising economic growth is important,” Rhee said.
Rhee also compared the situation of South Korea with that of Japan with regard to low birth rates and an aging population.
“If South Korea reaches the point of Japan, things will be much difficult. The IMF’s view is that it’s urgent to create a social safety net in the future through effective financial management and encourage more women into the workplace to help raise economic growth.”
The senior official also said the government needs to consider spending money now in preparation for senior poverty, which the country will face in 10 years.
In response to speculation of a possible housing market crisis, Rhee said, “though the possibility of heavy falls in housing prices leading to a crisis is not likely, it could slow down economic growth without appropriate measures.”
As for rumors that the U.S. is set to raise interest rates in December, Rhee put to rest worries by saying that a discrepancy between interest rates at home and abroad doesn’t necessarily lead to capital outflow.
According to Rhee, the next Global Financial Stability Report, to be released early next month, will include crucial information about the Chinese financial market.
Ashley Song (email@example.com)