A street in Hongdae, one of the busiest entertainment districts in Seoul, is crowded with people on July 6, 2021. (Yonhap)
SEOUL, April 26 (Korea Bizwire) — South Korea’s rate hike measures have weighed heavily on people’s spending, particularly impacting those in their 20s and 30s who have debt, a state-run think tank said Wednesday.
A 1 percentage-point hike in the key rate led to a decrease of 132,000 won (US$98.7) in annual spending of South Koreans with debt, a drop of 0.5 percent, according to the report released by the Korea Development Institute.
The Bank of Korea (BOK) has been keeping the benchmark interest rate unchanged at 3.5 percent since February as worries are growing that aggressive monetary tightening could hurt economic growth.
The figure nevertheless marks a 3 percentage-point jump since 2021.
By age group, the KDI said spending by 20-somethings with debt was estimated to have decreased 896,000 won over the course of the rate hike, while spending for those in their 30s was presumed to have fallen 613,000 won.
The KDI, however, said the spending of South Koreans aged 60 and above only decreased by a small margin over the period.
“Younger generations were found to be less capable of responding to rate hikes by selling assets or taking out more loans. This is due to their lower incomes and smaller asset sizes when compared to older generations,” the KDI said in the report.
The KDI advised the government to roll out policies to ease debt-related burdens for younger generations, such as enabling them to repay loans over a longer period of time.
(Yonhap)
